Financial institutions are struggling to keep pace with technological advancements while ensuring data security and compliance with stringent regulations. Data modernisation has emerged as a critical strategy for banks to remain competitive, enhance customer experiences and fortify data security measures.
In this blog post, we’ll discuss the importance of data modernisation in banking.
The Lay of the Land: Introduction to Data Modernisation in Banking
Data modernisation in banking involves transforming legacy data systems and processes into more agile, scalable and secure infrastructures that can support customers’ evolving needs and regulatory requirements. McKinsey projected that European banks are increasingly investing in data modernisation initiatives to drive innovation, improve operational efficiency and strengthen risk management practices.
Enhanced Customer Experiences and Insights
Banks are under pressure to deliver personalised experiences that meet the expectations of today’s tech-savvy customers. Data modernisation plays a crucial role in achieving this by enabling banks to harness the power of data analytics and artificial intelligence (AI) to gain deeper insights into customer behavior, preferences and needs.
A recent report by Capgemini found that 73% of banks believe data analytics are essential for improving customer experiences and driving competitive differentiation. By leveraging advanced analytics techniques, such as predictive modeling and sentiment analysis, banks can anticipate customer needs, tailor product offerings and deliver personalised recommendations in real-time, which inevitably improves reputation management — and revenue.
Improved Risk Management and Compliance
Enhancing risk management practices and ensuring compliance with stringent regulatory requirements in Europe can also be considered a major byproduct of modernising your data systems. With the implementation of the General Data Protection Regulation (GDPR) and the revised Payment Services Directive (PSD2), European banks must adhere to strict data security and privacy standards to protect customer information and mitigate the risk of data breaches.
According to a survey conducted by Deloitte, 82% of European banks cite regulatory compliance as a top driver for data modernisation initiatives. By modernising their data infrastructure and implementing robust security measures, banks can enhance their ability to detect and prevent fraudulent activities, comply with regulatory reporting requirements and mitigate operational and reputational risks.
Data Security Challenges and Strategies
Despite the benefits of data modernisation, European banks face significant challenges when it comes to ensuring the security of customer data. In fact, cyberattacks on European banks have increased by 80% over the past year, according to PWC, highlighting the growing threat of cybercrime in the region.
One of the main challenges is the evolving nature of cyber threats, including malware, phishing attacks and ransomware, which can bypass traditional security measures and exploit vulnerabilities in bank systems. To address these challenges, banks are investing in advanced cybersecurity technologies, such as endpoint detection and response (EDR) systems, threat intelligence platforms and security analytics tools.
Furthermore, banking organisations are adopting a risk-based approach to cybersecurity, which involves identifying and prioritising the most critical assets and vulnerabilities based on their potential impact on business operations and customer trust. By focusing on proactive threat detection, incident response, and recovery planning, banks can better protect against cyber threats and minimise the impact of security breaches on their reputation and financial stability.
In conclusion, data modernisation is essential for banks to remain competitive, enhance customer experiences and strengthen data security measures in an increasingly digital and interconnected world. By leveraging advanced analytics, AI technologies and robust cybersecurity measures banks can unlock new opportunities for innovation, improve operational efficiency and mitigate the risk of cyber threats and regulatory non-compliance. As European banks continue to invest in data modernisation initiatives, they will be better positioned to meet the evolving needs of customers and regulators while maintaining trust and confidence in the integrity of their data and systems.
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