The automatic teller machine was the pinnacle of innovation in banking and financial services back in the 70s and 80s. When you consider how far we’ve come, that seems like a distant memory. But even a decade ago, it was hard for people to imagine that we could check balances, pay bills, transfer money and even deposit checks with tiny phones that everyone carries everywhere. Technology has certainly propelled the financial services industry a long way in a short period of time – but that’s only half the story.
As consumers, we often see the best technology that the financial services industry has to offer. It’s as if we’re all tapping touchscreens in a modern Emerald City while the wizards of finance are still behind the curtain pulling levers and cranking knobs. The big secret is that the back-end technology powering financial services companies is in serious need of modernization and innovation. Most companies are still using decades-old technology at the core of their business, especially when it comes to the infrastructure used to store and analyze important financial data.
I saw this firsthand when I took a job at one of the world’s most respected wealth management and investment banking firms. I was excited to start a career in financial services where I could get my hand on cutting-edge tools and technology; I was ready to dive into the data and do amazing things. But after all that anticipation, I was shocked to find a much different reality. The technology my friends and I had been using in college classes was more advanced.
But don’t just take my word for it – across the industry, firms are finding it difficult to extract value from their data. Research by The Economist Intelligence Unit found that only 13 percent of fund managers believe their organization is capable of capturing the value of data “entirely.” In addition, 85 percent of asset managers said their organizations only captured value from data “fairly” or “somewhat” well.
The head of client analytics at UBS Wealth Management was quoted in the study saying that as much as 70 percent of analysts’ time can be spent on managing raw data, cleaning it and preparing it for analysis. “This means that only a fraction of analyst work-hours is left to extract insights and guide strategic decisions,” he added.
The slow pace of innovation for using data within financial firms isn’t because they don’t see the value. In fact, they’re seeing the potential value more and more every day. According research last year from New Vantage Partners, 70 percent of firms view Big Data as critically important, a number that’s up sharply from 21 percent in 2012.
There are many reasons why financial firms are lagging behind when it comes to their core technology. Upgrading the systems that have been powering these companies for decades is obviously complex. If it wasn’t, it would have been done by now. But firms can’t wait any longer and as digital transformation impacts nearly every industry, it’s time for them to adapt or be left behind. As the world becomes increasingly data-driven, there’s a major opportunity for the firms that embrace and transition to a modern, cloud-based architecture that can provide easy access to vast quantities, of data and the means to analyze it.