By Ross Feldman
The financial industry has been mired in turmoil since the start of the new millennium. The September 11 attacks are considered by some to be an inciting factor in major government reforms and subsequent measures to promote economic activity. Shortly thereafter, the United States witnessed corporations like Enron commit large-scale fraud, and many others came under scrutiny and investigation. Market instability, a credit crisis and the government bailout soon followed, leading to widespread calls for change in the regulatory system.
As a global hub of financial activity and one of the world’s largest financial capitals, New York felt a significant localizing effect from these events, which could explain why many of New York’s political leaders have pushed for stricter financial procedures. If you are a New York banker, you have witnessed from the front lines a change of pace that ushered in unprecedented reforms and customer unrest.
New regulations, such as the Dodd-Frank Wall Street Reform and the Sarbanes-Oxley Act, have strengthened the transparency and accountability of financial reporting, increased consumer protections against unclear financial services practices and helped decrease the chances of a large-scale financial crisis. Compliance requirements, such as the PCI Security Standard, and laws like the Check 21 Act, strive to eliminate crimes against individuals, organizations and money movement systems.
Technology’s Role in Meeting Regulatory Expectations and Compliancy
While today’s financial reforms seek to improve business practices, consumer and investor protections, as well as the overall U.S. economy, financial institutions are struggling to meet the stringent requirements of these new compliance and regulatory statutes.
To address these challenges, financial institutions are turning to technology. IT innovations are helping financial institutions secure, analyze and understand critical data, protect financial transactions, predict future problems and stay on top of consumer demands.
Business intelligence (BI) and “Big Data” analytics are emerging technology trends that are helping financial services organizations tackle today’s challenges. Banks and financial institutions have worked for years to do more with the vast amounts of data they have on customers, channels, financials and risk. With BI and analytics technologies, financial institutions can organize and analyze this wealth of data to produce meaningful information for decision making, predictions, customer guidance, cross-selling and complex problem solving.
Data analytics technologies are helping financial institutions:
Facilitate processes for management to execute adequate procedures, controls and confidence in reporting while providing greater depth in wtransparency.
More quickly and efficiently analyze transactional data to identify patterns or trends that indicate fraud, errors or misuse.
Identify early warning signs of threats to their business and enable risk exposure actions as a result.
Business and Competitive Needs Drive Adoption
Reforms in the financial services industry may have been driven by turmoil in the industry and the economy, but the adoption of new technologies like “Big Data” are the result of a perfect storm of business and competitive drivers in the marketplace.
New York banks join their U.S. and global counterparts in recognizing that the competitive landscape has changed dramatically. To survive, financial institutions can no longer defer plaguing questions about the viability of legacy infrastructure and complex integration needs after a decade of acquisitions and mergers. The global competitor is now on-shore and able to deliver customer satisfaction at an increasingly lower price-point.
How does one compete? By looking at technology with a renewed vision – one that not only considers efficiency gains, but looks to technology as a path to new service revenues and innovative outputs. While regulatory requirements are eating up a large portion of budgetary spend, banks are ever more cognizant that staying in business means staying ahead of business. Planning for an even greater competitive environment that demands a greater share of wallet for each customer takes business foresight and a commitment to getting started now. Technology transformations within the industry will quickly render the non-adopter as a non-player in the very near future.
A growing number of financial institutions are relying on outsourced IT service providers to help achieve their technology transformations and develop competitive advantage. Financial organizations can fill their budget-related technology gaps by shifting certain non-value added functions to outsourced service providers. By outsourcing infrastructure, application services and go-green initiatives, financial institutions can reduce costs and focus more of their limited available spend on growth- and revenue-producing initiatives.
The year 2012 has found financial institutions in New York, across the United States and worldwide in an interesting position. Although the impacts of the last decade are still present in global financial markets, 2012 is an exciting time for financial institutions to transform their existing infrastructures and take on new technologies, like “Big Data” analytics and business intelligence, to meet regulatory, consumer and economic demands while staying ahead of the competition.