How are the latest trends increasing demand for Data Scientists?
February 9th, 2023
X
Latest news
The secrets of how the financial services industry uses data
Generally speaking, data is most commonly used to deliver insight around three areas for companies across all sectors: profitability, customer behaviour and cost of sales – not particularly surprising, given these are areas that present strong ROI for data infrastructure spending. Sales and marketing remain the clear focus overall in 2015, as enterprises deploy data as a strategic asset to increase customer engagement and explore options for growth.
But we wanted to take a closer look at whether different industries were using data in different ways. Broken out by sector, there are indeed some differences that align with the particular focus of the business. For example, retailers focus mostly on customer data, whilst the IT/software sectors are leveraging data more for new product development. There are also differences that point to the maturity of data adoption within each group – as our recent State of Data survey suggests, there are some industries in which widespread data generation and analysis has yet to really take hold, or is overly focused on one area of the business.
When it comes to the Financial Services sector, however, we saw fairly solid distribution across a number of functions. It stands to reason that companies in Financial Services would be concerned with costs and compliance, but respondents in the sector also indicated they leverage data in such areas as understanding customers, setting pricing, and new product development. As with the other industries we looked at, the use of data to improve internal operations lagged behind externally focused areas.
Where Financial Services are using data:
The Compliance Gap
With 17% of survey respondents from the sector saying they leveraged data to help ensure legal and regulatory compliance, financial services is clearly the largest user for this application. But we were left to wonder why this figure wasn’t significantly higher. The financial industry is one of the most tightly regulated in the country, at least in terms of the complexity of the requirements. Every company in the industry is subject to some sort of external regulation, most usually from the new FCA, as well as internal and third-party audits. Considerations such as fraud and money laundering, client data protection, industry standards, record keeping, international transfer of funds – all of these are subject to extensive and thorough reporting requirements.
The impact of a heightened legislative and regulatory environment, combined with increased public scrutiny, since the global financial crisis that began in 2009 has been significant on the industry. Non-compliance or failure to maintain effective controls can be catastrophic for a financial services company, in terms of legal action, fines and public relations – all of which would be directly linked to its profit and loss statements. With regard to financial information, the watchwords are confidentiality, integrity and transparency – all of which could be vastly improved through the use of data management systems.
With the FCA now in its third year of industry oversight, the body has made its best practices clear: compliance is the responsibility of each firm, not of a third-party consultant they might be using – and if inadequate controls are in place, they would take action against the company, rather than the consultant. With that in mind, it’s in the best interest of financial services firms to explore ways to take ownership of the compliance function and bring the full power of its data strategy to bear on this critical issue.
Should financial services companies be more concerned with using data to ensure compliance? Are there any downsides to this strategy? Please share your thoughts with us below.
KDR Recruitment is the home of the best data, technology and analytics jobs. For more news and views follow KDR on LinkedIn.
