The future of banking in the world of data evolution

Sylvester Kinuthia

The economic and financial landscape is undergoing rapid transformation. As consumers and businesses increasingly prioritise speed, convenience and accessibility, banks must keep up. This means innovating at pace to enhance visibility, security, control over financial activities, and the end-user experience, most of which is becoming increasingly reliant on data.

Indeed, data is quickly becoming the foundation of how banks operate because it enables understanding consumers at all stages of their financial journey. Data is enabling banks and businesses alike solve some of their biggest problems.

At Standard Chartered Bank, we aim to be a digital-first and data-driven bank that delivers enhanced client experiences. What does it mean to be a data-driven bank? It’s about using data and analytics to better serve our customers; to anticipate their evolving needs, to personalise the products and services we provide them with and to embed ourselves deeper into their financial lives with real-time services.

In recent years, big data and emerging digital technologies continue to disrupt banking and other industries, as well as consumer behaviour.

Banking, as an industry, is best placed to benefit from big data because it can quickly adapt new technologies (i.e., AI, Machine Learning, Data Science, etc.) to deliver innovative solutions for core business challenges and generate new revenue streams.

However, to take advantage of data as a resource, banks need to ensure they have a data strategy. They also need to realise that transformation into a data-driven organisation requires alignment and clarity on the business and data strategy.

Most banks and organisations struggle to get this right because they don’t build a strong foundation for their data strategy. A solid data strategy involves having good data management processes.

In addition, good management of your data helps ensure that your analytics lead to actionable insights that generate beneficial outcomes such as personalised customer service, driving sustainability, fraud detection, lending decisions, regulatory compliance, cybersecurity, risk management, among others.

I will focus on three of the outcomes and benefits that banks can achieve from leveraging data and analytics as they look into the future – personalised customer service, cybersecurity, and sustainability.

Personalised customer service

Banks have an immense amount of data at their disposal, which, if properly collected, stored, and analysed, can be powerful in providing quality insights that can be used to customise solutions and services for customers.

Any bank that can do so will have a competitive edge by anticipating the needs of their customers and, as a result, driving up customer satisfaction.

One good example is the Advanced Analytics Dashboards that we provide to corporate clients at Standard Chartered.

These are interactive dashboards on our online banking platform, Straight2Bank, co-created with clients, helping them unlock value from their own data with actionable insights for them to make better business decisions.

Currently, these dashboards enable better informed working capital management, investment, and hedging decisions.

On our roadmap, we’re further enhancing the dashboards to provide more analytics on Trade and Supply Chains and Cash Balance Forecasting, all of which are important to treasury managers, especially in this fast-paced environment.

Closely linked to data and analytics is the use of AI, which is helping banks drive efficiency and customer-centricity, improve productivity and reduce costs.

A report by McKinsey suggests that the potential of AI in banking can grow to as much as $1 trillion. Banks will and should continue to develop and deploy AI capabilities for better, faster, cheaper, and safer banking services.

AI can be used in various ways, i.e., diagnostic AI (analysing data to understand why something happened), predictive AI (using data to predict what might happen in the future and what proactive actions to take), and generative AI (using data to automate processes, improve and personalise customer experience).

In all these scenarios, the key to success is to ensure that AI is used responsibly to avoid the pitfalls that exist. This requires having robust responsible AI governance to monitor and track implementation and use of AI.

As banks continue to increasingly leverage their data and emerging technologies such as AI, one of the key challenges facing banks today is on data privacy and protection, especially with growing public and regulatory pressure in this area.

Globally, banks already operate in a highly regulated environment and with existing and new laws such as Europe’s Global Date Protection Regulation, the California Consumer Privacy Act of 2018 and Vietnam’s Decree 13 on Personal Data Protection, banks need to always act responsibly and with utmost care.

Cybersecurity

As both technology and the threat landscape evolve, the focus for banks should be to protect their data and business. This focus should be both inwards (looking at your own defences to ensure that your assets are protected against external threats such as ransomware, or hacking) and outwards (looking beyond yourselves to add value to your customers with cybersecurity).

As mentioned earlier, while data is quickly becoming the cornerstone of how banks operate, building and maintaining credibility and trust is the cornerstone of banking. Cyberattacks come with significant consequences, especially for the banking and financial services sector where the stakes are high.

We can only expect the frequency, scale, and sophistication of these attacks to increase in a rapidly digitising global business environment.

A single cyber incident can erode trust, stifle innovation, and weaken the foundations of any institution.

Cyber vigilance is critical to being a future-fit business. Banks must do their utmost to embed cybersecurity in their culture and ways of working, and strengthen internal awareness and preparedness at all levels to protect their assets. In Vietnam, the issuance of Decree 53, the guiding Law on Cybersecurity, demonstrates the importance and emphasis the government places on this subject.

Sustainability

Sustainability is of growing importance the world over and as climate-related concerns become even more pressing, banks can play a critical role in helping businesses adopt environmental, social and governance (ESG) policies and practices through expertise and advisory services.

With increasing demand on ESG responsibility across industries, data and analytics provide a great opportunity to drive a positive impact in the communities we operate in.

According to an article by Genpact, data-driven sustainability means collecting and using data to make decisions that guide measurable and responsible business practices. Whether it's lowering greenhouse-gas emissions, optimising supply chains, or reducing waste, insights from sustainability data can power positive change while increasing profitability.

As an example, through data analytics, banks can better identify and analyse business opportunities from prospective real estate customers, which can improve decision-making on the issuance of sustainability-linked loans and assessment of whether borrowers meet environmental impact targets.

Subsequently, this helps banks to better understand and manage the environmental impact of their loan portfolio and foster greater climate friendly practices for the society and business community at large through their financing activities.

Another good example of how data can be used as a force for good is in Trade and Supply chains.

Supply chains are becoming increasingly complex because they involve many parties, but also because they have been disrupted in recent years by the pandemic and ongoing geopolitical tensions.

This has accelerated the need to diversify production and distribution and ensure access to supply chain financing.

Additionally, due to the increased pressure to report on social issues and Scope 3 emissions within their supply chains, corporates are increasingly embracing digitisation and looking at ways to leverage data and emerging technologies to tackle this issue.

Technology such as blockchain provides fast and secure information movement, enables data-sharing and management, and improves confidence that electronic documentation is genuine and valid, throughout the distribution process.

However, the process of data collection, which data points to collect, the quality of data and the insights that can be derived from the data remain a challenge. Despite the challenges, there are encouraging signs, with a growing number of organisations coming together to define industry-wide standards to effect real change. At the heart of this is technology, which is enabling automation of data collection and analysis, tracking, and tracing.

Banks play a critical role in providing the financial tools and platforms to facilitate this. Corporates are increasingly working with banks that leverage technology to help them continuously monitor their supply chains for ESG weak spots, but also leverage data to drive a more inclusive supply chain with financing, even for the deepest tier suppliers.

In this evolving business and regulatory environment, it’s difficult to predict how data will be regulated across different jurisdictions in the future.

It will most likely continue to be highly regulated, closely guarded by organisations that capture it, and a key source of business value.

Banks that move quickly to leverage data and emerging technologies will be able to create seamless and personalised digital experiences for their customers, drive positive change through investing in ESG initiatives, improve efficiency and productivity whilst meeting their employee needs, which will lead to great success.

That said, the journey is not without challenges – regulatory compliance, data security, risk management, and cybersecurity – these require a balanced approach that considers not just the technological aspects but also the human, ethical and regulatory factors.

The evolution of data and the transformative impact it is having and will continue to have on banking in years to come is undeniable. To support the real economy and provide an enabling environment for businesses everywhere to grow and prosper, it’s time to bring forth the future of banking, harnessing emerging technologies to create new opportunities for sustainable growth.

Data protection heads digital banking efforts Vietnamese authorities have been busy at work dismantling an illicit information network involving bank employees, as local lenders prioritise data protection and digital infrastructure for customer privacy and growth.

Data centricity - the pivot of your future strategy In just a few years’ time, data centricity will drive and predict the most important decisions, processes, and interactions of market-leading financial institutions (FIs) across Asia-Pacific and beyond.