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Far-reaching data protection regulations like PSD2 are both a consequence and catalyst of change in how financial service providers store, manage and use data. As banking services and products digitize, that means institutions have more data to handle – much, much more – impacting everything from compliance to customer relations.
Corporate banking is a significant part of this digital transformation. Analysts at Boston Consulting Group estimated earlier this year that novel digital financial services platforms like ePayments, cross-border transactions and supply chain financing will yield nearly a third of corporate banking revenue.
But in an environment in which compliance pressures are rising, profits are declining and competition from FinTechs continues to build, the way in which corporate banks manage their data can mean sink or swim.
Less than half of the corporate banks surveyed by BCG said they had a clear digital strategy, while 86 percent admitted that their institution’s complex infrastructures present barriers to digitization.
“Corporate banks have a major advantage over FinTechs and other potential competitors that most don’t exploit well enough,” BCG concluded in its report. “They have huge amounts of data that could be put to use in myriad ways. Unlocking this data is critical to their digital transformation and competitive vigor.”
FinTech can be a rival, but it can also be a key partner for traditional financial services looking for guidance in their data management and analytics strategies.
One technology startup, Devo, secured $25 million for its products and services in this market. The company serves, among other industries, the financial services space, providing management and analysis of historical and real-time, incoming data streams.
Devo Chief Strategy Officer Colin Britton told PYMNTS that, in the world of financial services, data volume is only one of the challenges industry players face.
“We’re seeing increases in the volume of data people are getting, as well as the type of data,” he said, adding that there are also changes in how professionals and customers interact with that data, how a company’s services operate and what’s actually occurring within those services.
In financial services, digitization has dramatically broadened the data pool.
“To get you a simple example,” Britton noted, “wire transfers, traditionally, involve a single message request and a single message response to initiate the transfer. If someone transfers money via a global banking app, there are significantly more types of data exchanges that occur.”
The implications of this are vast, too, including security issues, analytics capabilities, compliance and beyond; current infrastructure can rarely handle this.
“The challenge of the volume of data that is coming in – this is outstripping traditional systems that are in place,” Britton said. “There are multiple aspects to this: security, compliance, data retention.”
In financial services, the complexities of this infrastructure mean that any data anomalies aren’t necessarily revealing themselves where the problem occurs, thanks to multiple tiers of systems in place.
“Digital transformation is driving toward a data visibility problem,” said Britton. “They’ve been addressing this and they have tools, but they’re often no longer scalable for their business.”
Adding an extra layer of complication to data management in the financial services market is the need for speed. As payments accelerate, and as end users demand faster solutions, banks and other financial services providers have to make decisions quickly and need access to real-time data, according to Britton.
“Making better decisions faster” is key to ensuring that data strategies positively impact the bottom line, he said. “Whether directly within a security scenario, when you have an indication of behavior that is suspicious, you want to be on that as fast as possible. Maintaining real-time visibility into your security is key.”
Other examples of how enhanced data analytics strategies support financial growth for FinServ include faster, more agile responses to customer needs, he added.
As financial service providers continue on their digital transformation journeys, data management is a critical component of this. According to BCG Senior Partner Dr. Carsten Baumgärtner, the industry has a lot to lose if they aren’t able to adapt to today’s data management and analytics demands.
“Digital is forcing sweeping changes in corporate banking, and institutions will need to adapt or see their competitiveness and market share steadily spiral down over the next few years,” Baumgärtner said in a statement in March. “Now is the time to develop a more coherent digital strategy to decide where to play and how to invest.”
“The financial stakes are very high,” he added.
But according to Britton, the financial services market has to be deliberate about the data technologies they use.
“You have to be able to be flexible about how you manage and control your data,” he said, citing changing market characteristics and regulations. “For us, this is an area of incredible growth. There is incredible pressure being put on businesses to capture more data, to understand more and to respond faster.”
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