Picture this: Peter walks into his local bank branch, eager to open a new investment account. The bank representative, happy to assist, begins the process – only to encounter several roadblocks. Peter’s name appears in the system twice with slightly different addresses. His phone number is listed incorrectly in one record and completely missing in another.
This data inconsistency creates a frustrating experience for both Peter and the bank representative. Result? A lot of time is wasted, data accuracy stands compromised, and the overall customer experience suffers. Scattered, inaccurate, or inconsistent information is a recipe for disaster.
A Gartner study reveals that poor data quality costs organizations an average of $12.9 million annually. This is where Master Data Management steps in as a game-changer. This blog will go over some key pointers that explain why master data management is essential for financial services.
MDM in Finance
The financial services industry is undergoing a major transformation. New competitors are emerging, customer expectations are rising rapidly, and regulations are becoming increasingly complex. On top of this, financial institutions are dealing with a growing mountain of data from various sources, including legacy systems, mobile apps, and administrative tools.
Data Management Challenges Faced by Financial Services
Let’s try to understand this with the help of a hypothetical example. There’s a financial services firm, XYZ. It has multiple departments including banking, investment, and insurance, and each has its own data management system. Following are the problems faced by the firm:
- The information is isolated within departments and not easily accessible across the organization. For instance, a customer's investment data is not integrated with their banking data. This makes it difficult to provide personalized services and insights.
- Different departments use varied formats and standards, leading to discrepancies. The same customer is listed under slightly different names or addresses in separate systems. This complicates efforts to maintain a single, accurate customer profile.
- Integrating data from various sources, both internal and external, is challenging. The firm uses diverse systems and platforms, including legacy systems that are not easily compatible with newer technologies. This lack of integration hinders the firm’s ability to perform data analysis and leverage insights for strategic decision-making.
- Another challenge is establishing a strong data governance framework for data management, including data ownership, stewardship, and lifecycle management. Aligning all the departments with these policies and ensuring adherence is a complex and ongoing task.
To navigate this challenging environment, financial institutions are rediscovering a fundamental truth: accessing accurate and timely master data is critical for success. Master data refers to the core data that is essential for the business, such as customer information, product details, and financial instruments. Having this data readily available and reliable is key to making informed decisions, providing excellent customer service, and complying with regulations.
Benefits of Master Data Management
As a financial institution, your data revolves around three key areas: clients, products, and assets. When you master these domains, you gain a complete picture of all the information stored within them. It helps you:
- Uncover connections between clients and understand how your customers interact with each other.
- See which products your clients already own and identify potential upsell or cross-sell opportunities.
- Navigate regulations with ease and determine which regulations apply to each transaction.
- Identify suspicious activity more effectively.
- Meet customer privacy requests with greater efficiency.
This is just the beginning – a centralized data management system unlocks a range of advantages. Let’s cover them one by one.
1. Consolidate Your Data
There are chances that your financial institution will have customer data scattered across different systems. Account information might be in one system, product details in another, and transaction history in a third. This fragmented approach makes it difficult to get a holistic view of your customer base. MDM acts as a central hub, consolidating all your customer data into a single, unified source.
This eliminates duplication, inconsistencies, and inaccuracies. With a single source of truth, you can gain a complete understanding of your customers. It enables you to make personalized product recommendations. A study reveals that more than 70% of CFOs view a single source of truth as essential for effective decision-making.
Modern MDM solutions like Informatica enable you to unify data across your organization for a contextual 360-degree view. AI-powered, all-in-one capabilities help you deploy faster. Informatica helps reveal hidden connections within your data. It identifies how customers interact with specific products, how employees collaborate across departments, and more. These insights empower you to optimize your business processes.
2. Enable Enhanced Security
Did you know that 85% of businesses believe data silos directly increase security vulnerabilities? You hold different types of sensitive customer information, like account details, financial history, and potentially even personal identification data.
A data breach could expose this information, putting your customers at risk of identity theft and financial loss. This can eventually damage their trust in you. MDM provides a centralized, controlled environment for managing and protecting sensitive financial data.
It ensures that data is consistently accurate, compliant, and up to date across all systems. Stringent access controls, data governance policies, and data validation processes are implemented within an MDM framework to mitigate risks of data breaches and unauthorized access.
3. Level Up Your Analytical Capabilities
When you have a single view of your data, you can perform more accurate and in-depth analyses and identify trends that might otherwise go unnoticed. This enables you to make informed decisions regarding risk management, investment strategies, and market opportunities.
With machine learning algorithms on high-quality data, you can develop predictive models that anticipate customer behavior, market shifts, and emerging risks. Maintaining high quality data to perform accurate analysis is easy with Informatica. It enables you to autogenerate common data quality rules across data from different sources.
4. Facilitate Operational Efficiency & Cost Savings
Did you know 20-30% of operational expenses are due to bad data? Here comes MDM! SaaS MDM solutions powered by AI automate data management processes and reduce the time spent on data reconciliation. Your team can access and share information more easily, eliminating the need for manual data entry. PwC predicts that by 2035, AI will improve productivity by 40%. It will speed up workflows and free up resources to focus on more strategic initiatives.
Nearly 21% of organizations experience reputation damage due to bad data. Inconsistent or inaccurate data can lead to significant financial losses, whether through regulatory fines, lost business opportunities, or inefficiencies. MDM processes clean and standardize your data and reduce the costs associated with storing and maintaining multiple copies of the same data.
Stay on Top of Data Excellence with LumenData
As a proud recipient of Informatica’s Global Delivery Channel Partner of the Year 2023, we are the #1 provider of SaaS MDM implementation services. We’ve done more SaaS MDM implementations than any other partner, and we know how to drive up IPUs with integration to Snowflake, Databricks, and more.
Our team has developed a comprehensive range of accelerators for migrating data from Informatica on-premises to SaaS MDM, Axon to CDGC modernization, Oracle UCM to Informatica SaaS MDM. Leverage our customized QuickStart programs that enable you to go live in just 8-12 weeks.
If you are looking to enable rapid deployment with zero downtime, initiate a conversation with us today!
Authors
Shalu Santvana
Content Crafter
Mohd Imran
Senior Consultant
