Designing a data transformation that delivers value right from the start

share save 171 16 - Designing a data transformation that delivers value right from the start

McKinsey&Company | By Chiara Brocchi, Davide Grande, Kayvaun Rowshankish, Tamim Saleh, and Allen Weinberg | Oct 2018

payments - Designing a data transformation that delivers value right from the startWhile most companies understand the importance of analytics, fewer than 20 percent have maximized the potential and implemented AA at scale.

The CEOs of most financial institutions have had data on their agenda for at least a decade. However, the explosion in data availability over the past few years—coupled with the dramatic fall in storage and processing costs and an increasing regulatory focus on data quality, policy, governance, models, aggregation, metrics, reporting, and monitoring—has prompted a change in focus. Most financial institutions are now engaged in transformation programs designed to reshape their business models by harnessing the immense potential of data.

Leading financial institutions that once used descriptive analytics to inform decisionmaking are now embedding analytics in products, processes, services, and multiple front-line activities. And where they once built relational data warehouses to store structured data from specific sources, they are now operating data lakes with large-scale distributed file systems that capture, store, and instantly update structured and unstructured data from a vast range of sources to support faster and easier data access. At the same time, they are taking advantage of cloud technology to make their business more agile and innovative, and their operations leaner and more efficient. Many have set up a new unit under a chief data officer to run their data transformation and ensure disciplined data governance.

See:  Global payments: Expansive growth, targeted opportunities

Successful data transformations can yield enormous benefits. One US bank expects to see more than $400 million in savings from rationalizing its IT data assets and $2 billion in gains from additional revenues, lower capital requirements, and operational efficiencies. Another institution expects to grow its bottom line by 25 percent in target segments and products thanks to data-driven business initiatives. Yet many other organizations are struggling to capture real value from their data programs, with some seeing scant returns from investments totaling hundreds of millions of dollars.

A 2016 global McKinsey survey found that a number of common obstacles are holding financial institutions back: a lack of front-office controls that leads to poor data input and limited validation; inefficient data architecture with multiple legacy IT systems; a lack of business support for the value of a data transformation; and a lack of attention at executive level that prevents the organization committing itself fully (Exhibit 1). To tackle these obstacles, smart institutions follow a systematic five-step process to data transformation.

 

1. Define a clear data strategy

Obvious though this step may seem, only about 30 percent of the banks in our survey had a data strategy in place. Others had embarked on ambitious programs to develop a new enterprise data warehouse or data lake without an explicit data strategy, with predictably disappointing results. Any successful data transformation begins by setting a clear ambition for the value it expects to create.

In setting this ambition, institutions should take note of the scale of improvement other organizations have achieved. In our experience, most of the value of a data transformation flows from improved regulatory compliance, lower costs, and higher revenues. Reducing the time it takes to respond to data requests from the supervisor can generate cost savings in the order of 30 to 40 percent, for instance. Organizations that simplify their data architecture, minimize data fragmentation, and decommission redundant systems can reduce their IT costs and investments by 20 to 30 percent. Banks that have captured benefits across risk, costs, and revenues have been able to boost their bottom line by 15 to 20 percent. However, the greatest value is unlocked when a bank uses its data transformation to transform its entire business model and become a data-driven digital bank.

Actions: Define the guiding vision for your data transformation journey; design a strategy to transform the organization; establish clear and measurable milestones

2. Translate the data strategy into tangible use cases

Identifying use cases that create value for the business is key to getting everyone in the organization aligned behind and committed to the transformation journey. This process typically comprises four steps.

In the first step, the institution breaks down its data strategy into the main goals it wants to achieve, both as a whole and within individual functions and businesses.

See:  Large Global Payments Processor Unveils Airdropping Campaign Among Users

Next it draws up a shortlist of use cases with the greatest potential for impact, ensures they are aligned with broader corporate strategy, and assesses their feasibility in terms of commercial, risk, operational efficiency, and financial control. These use cases can range from innovations such as new reporting services to more basic data opportunities, like the successful effort by one European bank to fix quality issues with pricing data for customer campaigns, which boosted revenues by 5 percent.

Third, the institution prioritizes the use cases, taking into account the scale of impact they could achieve, the maturity of any technical solutions they rely on, the availability of the data needed, and the organization’s capabilities. It then launches pilots of the top-priority use cases to generate quick wins, drive change, and provide input into the creation of a comprehensive business case to support the overall data transformation. This business case includes the investments that will be needed for data technologies, infrastructure, and governance.

The final step is to mobilize data capabilities and implement the operating model and data architecture to deploy the use cases through agile sprints, facilitate scaling up, and deliver tangible business value at each step (Exhibit 2). At one large European bank, this exercise identified almost $1 billion in expected bottom-line impact.

Actions: Select a range of use cases and prioritize them in line with your goals; use top-priority use cases to boost internal capabilities and start laying solid data foundations.

3. Design innovative data architecture to support the use cases

Leading organizations radically remodel their data architecture to meet the needs of different functions and users and enable the business to pursue data-monetization opportunities. Many institutions are creating data lakes: large, inexpensive repositories that keep data in its raw and granular state to enable fast and easy storage and access by multiple users, with no need for pre-processing or formatting. One bank with data fragmented across more than 600 IT systems managed to consolidate more than half of this data into a new data lake, capturing enormous gains in the speed and efficiency of data access and storage. Similarly, Goldman Sachs has reportedly consolidated 13 petabytes of data into a single data lake that will enable it to develop entirely new data-science capabilities.

Choosing an appropriate approach to data ingestion is essential if institutions are to avoid creating a “data swamp”: dumping raw data into data lakes without appropriate ownership or a clear view of business needs, and then having to undertake costly data-cleaning processes. By contrast, successful banks build into their architecture a data-governance system with a data dictionary and a full list of metadata. They ingest into their lakes only the data needed for specific use cases, and clean it only if the business case proves positive, thereby ensuring that investments are always linked to value creation and deliver impact throughout the data transformation.

See: 

However, data lakes are not a replacement for traditional technologies such as data warehouses, which will still be required to support tasks such as financial and regulatory reporting. And data-visualization tools, data marts, and other analytic methods and techniques will also be needed to support the business in extracting actionable insights from data. Legacy and new technologies will coexist side by side serving different purposes.

The benefits of new use-based data architecture include a 360-degree view of consumers; faster and more efficient data access; synchronous data exchange via APIs with suppliers, retailers, and customers; and dramatic cost savings as the price per unit of storage (down from $10 per gigabyte in 2000 to just 3 cents by 2015) continues to fall.

In addition, the vast range of services offered by the hundreds of cloud and specialist providers—including IaaS (infrastructure as a service), GPU (graphics-processing unit) services for heavy-duty computation, and the extension of PaaS (platform as a service) computing into data management and analytics—has inspired many organizations to delegate their infrastructure management to third parties and use the resulting savings to reinvest in higher-value initiatives.

Consider ANZ’s recently announced partnership with Data Republic to create secure data-sharing environments to accelerate innovation. The bank’s CDO, Emma Grey, noted that “Through the cloud-based platform we will now be able to access trusted experts and other partners to develop useful insights for our customers in hours rather than months.”

Actions: Define the technical support needed for your roadmap of use cases; design a modular, open data architecture that makes it easy to add new components later.

Continue to the full article --> here


NCFA Jan 2018 resize - Designing a data transformation that delivers value right from the start The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

Latest news - Designing a data transformation that delivers value right from the startFF Logo 400 v3 - Designing a data transformation that delivers value right from the startcommunity social impact - Designing a data transformation that delivers value right from the start
NCFA Newsletter subscribe600 - Designing a data transformation that delivers value right from the start

FFCON20 Homepage Banner 600 - Designing a data transformation that delivers value right from the start

Forbes | Michael del Castillo | Feb 19, 2020 Credit card giant Visa has granted its principal membership to a cryptocurrency company for the first time. Officially awarded to cryptocurrency exchange Coinbase in December, but not revealed to the public until today, the membership cuts out a crucial, and expensive middleman from the process of issuing a debit card that lets users spend their own bitcoin, ether and XRP anywhere Visa is accepted. Perhaps even more importantly though, the principal membership makes Coinbase the first cryptocurrency company with the power to issue debit cards for others, including other cryptocurrency companies and more traditional firms alike. Visa confirmed it granted Coinbase the principal membership, clarifying that the company itself won’t actually accept cryptocurrency when the project goes live later this year. See:  Visa R&D Arm Develops a Blockchain System That Could Replace Financial Data Aggregators While Coinbase says it’s not planning on issuing cards to others anytime soon, the principal membership status marks a potentially important new revenue stream for the company, which Forbes estimates saw a 40% decline in earnings last year. By simplifying the process of spending cryptocurrency anywhere Visa is accepted, the membership also lays the foundation for ...
Read More
Coinbase crypto visa payments - Designing a data transformation that delivers value right from the start
Forbes | Ron Shevlin | Feb 21, 2020 LendingClub, one of the nation’s first peer-to-peer lenders (oops! I mean, “marketplace” lenders—real ”peer to peer” lending lasted all of about a month), announced it plans to acquire Radius Bank, a relatively small Boston-based bank, unknown to most people outside of the industry (and within, for that matter). The press release announcing the pending deal contained the usual platitudes from the acquiring CEO: “This is a transformational transaction that allows us to reimagine banking in a way that is free from legacy practices and systems. We will create a category-defining experience for our members that will dramatically enhance the resilience and earnings trajectory of our business.” Despite the buzzword-laden proclamation, this acquisition makes a lot of sense for both parties for reasons that go beyond what many observers have reported on. The Short-Term Benefits Aren’t About Radius Bank Much of the discussion about the deal has focused on the obvious and shorter-term benefits of the acquisition, including a more stable source of funding and a $40 million reduction in bank fees and funding costs, both of which will help boost the spread Lending Club earns on the loans it keeps on its ...
Read More
LendingClub banner  - Designing a data transformation that delivers value right from the start
Pymnts | February 18, 2020 Online bank N26‘s decision to exit the U.K. has customers feeling left behind, CNBC reported. The Berlin-based digital bank said it would not be able to operate in the country anymore in the wake of Brexit, as it will no longer have a license to do business there. The startup will shutter all of its U.K. locations on April 15. N26 made its entry into the U.K. in October of 2018 — more than two years after the U.K. made its decision to leave the European Union, but six months before Brexit was officially planned. However, the fact that N26 used Brexit in its reasoning to leave the U.K. hasn’t sat well with some. One customer in London told CNBC that he was “outraged” that the company had used Brexit as an excuse, calling it “fake news.” He said N26 needed “an excuse” for investors, and had found in Brexit a convenient scapegoat so that it wasn’t N26’s own failure. Others said they were disappointed in the closure, enjoying the extra bonuses that come with accounts. See:  Majority of London FinTechs not prepared for no-deal Brexit N26 is one among a new breed of branchless ...
Read More
N26 and Brexit - Designing a data transformation that delivers value right from the start
TechTalks | Andrey Sergeenkov | Feb 12, 2020 As 2018 drew to a close, crypto skeptics were ready to write obituaries after the devastating bear market that year. Talk of blockchain and cryptocurrency demise was rife among seasoned analysts. Just over twelve months later, the industry has shown remarkable resilience to rebound back. Regulators are a segment of stakeholders who seem to be appreciating that crypto is here to stay, with Federal agencies in the US and Chinese authorities praising the potential of this technology in their respective countries’ digital future. Blockchain technology has gained independent credibility over and above its application in cryptocurrency. The opportunities are endless as the emerging enterprise sector continues to draw plaudits. So far, this technology has grown in spite of regulatory infrastructure rather than because of it. A suitable regulatory climate is essential for widespread adoption. See:  The Decade in Blockchain — 2010 to 2020 in Review This is how Jason Lee, Vice President of NEM Foundation, describes the industry’s evolution: “2017 was the year of the blockchain craze. In 2018, we hit the brakes towards the end of the year. For 2019 and the start of 2020, Don Tapscott at the World Economic ...
Read More
blockchains - Designing a data transformation that delivers value right from the start
Betakit | Isabelle Kirkwood | Feb 10, 2020 PwC Canada and CB Insights have released the MoneyTree report on Canadian investment trends for the second half and full year of 2019 (all figures in USD). “Increased competition for funding from global investors has created a healthy funding environment for Canadian startups.” Last year saw Canadian venture capital (VC) funding rise to a record-setting $4.1 billion. Although Canadian funding experienced an 11 percent decline in deal count last year, the report tracked a 16 percent increase in year-over-year funding. Some massive rounds from last year were not included in this year’s report, including Verafin’s round, as the company did not disclose the debt and equity break out, and Sonder’s $210 million raise as the company is now headquartered in the United States. A strong year for AI, FinTech, cybersecurity Artificial intelligence companies saw increased investor attention in 2019, investment in Canadian AI companies more than doubled in the second half of 2019. Last year’s funding to Canadian AI companies saw a 49 percent year-over-year increase in 2019 to $658 million with deal count reaching a new record at 57 deals. See:  The paradox of 2020 VC is that the largest funds ...
Read More
funding by region 2019 - Designing a data transformation that delivers value right from the start
Forbes | Billy Bambrough | Feb 18, 2020 Samsung, the South Korean technology giant and creator of the Galaxy smartphone range, could soon become one of the biggest drivers of bitcoin, crypto and blockchain adoption. While bitcoin traders and investors are focused on the upcoming bitcoin halving, a looming U.S. bitcoin crackdown, and rocky crypto trading volume, Samsung is putting the power of bitcoin, crypto and blockchain in people's hands. Last week, Samsung, which makes up 19% of global smartphone sales and last year sold almost 300 million phones according to data site Statista, unveiled it latest Galaxy smartphone range with its new flagships the S20, S20+ and S20 Ultra models. These new 5G enabled smartphones build on the Galaxy S10 ranges' bitcoin, cryptocurrency and blockchain support, which last year was revealed to boast a built-in bitcoin and cryptocurrency wallet. "We created a secure processor dedicated to protecting your PIN, password, pattern, and Blockchain Private Key," Samsung wrote on its website, announcing the new S20 Galaxy phones. "Combined with the Knox platform, security is infused into every part of your phone, from hardware to software. So private data stays private." Samsung's so-called Blockchain Keystore was introduced last year, initially with ...
Read More
Samsung - Designing a data transformation that delivers value right from the start
Bank Innovation | Rick Morgan | Jan 22, 2020 HSBC is improving payments for its business clients through a suite of tools launched last week called Treasury APIs, which are designed to speed up payments for small businesses and large corporate clients alike.  HSBC’s Treasury APIs embed payment capabilities into other workflows. According to the bank, this allows treasurers to make payments from their own workstations without logging into a proprietary bank platform. Clients receive confirmation that a payment request has been received and can track payments from their accounts to recipients. Nadya Hijazi, head of digital, global liquidity and cash management at HSBC, said clients using the tool include e-commerce platforms, treasury teams and mutual fund teams.  The new products let HSBC business clients pay suppliers more quickly; Hijazi said payments that used to take anywhere from one or two days in the past now take about 10 or 20 seconds.  HSBC, which is headquartered in London, has $2.7 trillion in assets. Treasury APIs are now available in 27 markets throughout Asia, Europe, the Middle East and the Americas. The bank piloted the tools in India last summer.  See:  HSBC Canada Breaks from Big Six Banks in Call to Encourage Fintechs In addition to paying suppliers, HSBC business customers can also issue ...
Read More
bank innovation - Designing a data transformation that delivers value right from the start
Investment Executive | James Langton | Feb 12, 2020 Regulators grapple with crypto trading Global securities regulators are monitoring the emerging crypto asset sector, but aren’t yet seeking to establish global standards for crypto trading platforms. The International Organization of Securities Commissions (IOSCO) has issued a report detailing the risks associated with crypto trading, including concerns about platform access, asset safekeeping, price discovery, transparency and conflicts of interest. See:  SEC Commissioner Speech: A Proposal to Fill the Gap Between Regulation and Decentralization Many of these same issues arise in the regulation of traditional securities trading too, the report noted. So, to the extent that particular crypto assets are considered to be securities, “the basic principles…of securities regulation should apply,” the report said. However, crypto trading platforms may also raise novel regulatory concerns due to their particular business models, IOSCO warned. The report said that some regulators have determined that their existing frameworks for overseeing traditional trading venues will also apply to crypto trading, but that some are also considering new requirements “to account for the novel and unique characteristics” of crypto trading. The group’s report — which was prepared by an IOSCO committee led by the Ontario Securities Commission (OSC) — ...
Read More
contemplating regulation - Designing a data transformation that delivers value right from the start
Wharton Knowledge | Kalin Anev Janse | Oct 10, 2019 Can Fintech Make the World More Inclusive? The potential gains for the start-ups driving fintech (financial technology) are obvious. But the possibilities for extending financial services to the underserved – or those without services at all – are already being realized. With proper oversight and regulation even more is possible, notes this opinion piece by Kalin Anev Janse, secretary general and a member of the management board of the European Stability Mechanism (ESM), the Eurozone’s lender of last resort, and Gong Cheng, senior economist and policy strategist at the ESM. “It is thus essential for researchers and technical experts to shed light on the considerable social impact and promise fintech is offering and to find solutions to contain potential risks.” Financial inclusion – making banking services accessible and affordable to everyone globally – has been a buzzword for the last few years. Technology-based financial services have propelled innovation to “bank the unbanked” making daily financial operations accessible and user friendly for almost everyone – especially people who had no access to banks before. Emerging markets like China, Kenya and Indonesia are leapfrogging the developed world. So – how is fintech making the ...
Read More
financial inclusivity taxi - Designing a data transformation that delivers value right from the start
Coindesk | Nathan DiCamillo | Feb 13, 2020 Fresh on the heels of an $18.3 million Series A funding round in August, crypto lending startup BlockFi has secured a $30 million Series B. Announced Thursday, the new funding will help the firm expand both its product offering and geographic footprint. “We decided to opportunistically raise the Series B to expand the balance sheet and give ourselves the ability to invest in the things we’re doing this year,” BlockFi CEO Zac Prince said in an interview. The Series B was led by Peter Thiel’s Valar Ventures with participation from repeat investors Morgan Creek Digital, PJC, Akuna Capital, CMT Digital, Winklevoss Capital and Avon Ventures. New investors included Castle Island Ventures, Purple Arch Ventures, Kenetic Capital, Arrington XRP Capital and HashKey Capital. Having Hong Kong-based HashKey as an investor will help BlockFi expand into Singapore later this year, Prince said. While the company has been serving customers in the region, this would be its first physical presence there. See:  Why DeFi’s Billion-Dollar Milestone Matters In the Asia-Pacific region, BlockFi expects to attract a lot of institutional customers, Prince said, given the number of mining companies, asset managers, exchanges and market makers that ...
Read More
Peter Thiel backs Blockfi - Designing a data transformation that delivers value right from the start

 

share save 171 16 - Designing a data transformation that delivers value right from the start