“Once the business data has been centralized and integrated, the value of the database is greater than the sum of the pre-existing parts.”

— Larry Ellison, co-founder and CTO at Oracle 

Financial data integration is the way to unlock efficiencies and robust, data-driven decision-making throughout your business. 

It’s also how you lay the groundwork for enabling new approaches like hyper-personalized services and omnichannel banking. In fact, a survey of 250 financial leaders identified data silos as the main barrier to such innovation. There are so many reasons to integrate your data. Here are a few: 

Why financial data integration matters

Ninety percent of the world’s data was generated in the last two years. Of course, large and growing volumes of data must be managed effectively in order to be useful. 

Unfortunately, Capgemini’s 2022 survey of more than 8000 respondents has revealed that many banks are not yet up to the task. 95 percent of top global banking executives said outdated legacy systems and core banking platforms inhibit efforts to optimize data and customer-centric growth strategies. 70 percent said they lacked the resources to process and analyze data, and the problems are only getting worse as data volumes increase. 

As Mark Twain, of all people, put it, “Data is like garbage. You had better know what you are going to do with it before you collect it.” Not a perfect metaphor, but you get the gist. 

So what do you do with it? 

Data democratization is the obvious starting point. Meaning, breaking down silos to arrive at a real-time, single source of truth. That matters for a number of reasons. 

Regulatory compliance 

Data reconciliation and visualization is the process of generating usable data modeling. You need usable data modeling to develop insights for decision-making and also to comply with regulations and risk controls. Yet manually bringing together data points across process streams, departments and formats is time-consuming and costly. 

The shift from manual to automated — data integration, in other words — is quickly becoming the only way to ensure the scale of data availability you need to comply with the demands of regulators who require accurate, harmonized and granular data reports. These regulations are going to tighten over time. And as we’ve said, the amount of data is only going to increase, too. Much better to proactively adopt a more democratized system than to do so under duress. 

Data security 

Both internal and external threats are on the rise. Moreover, 45 percent of FSIs claim providing secure data access to employees at every level of the organization is a significant challenge. 

Siloed systems are riddled with outdated ETL tools and unmanaged access control. When developers cannot build security into a centralized system, they are forced to secure each successive layer on an application level, which can lead to catastrophic misconfiguration (a la Capital One in 2019). Centralized data is more secure and easier to manage long-term. 

Challenger banks 

The good news is banks already have access to large volumes of valuable data. The bad news is they lack the means to deploy that information to the best effect. 

New Fintechs are not as encumbered by legacy systems and so can better use financial data to turn it into a competitive advantage. They’re able to operate on lead budgets and make predictions about future trends, acting on them before incumbents have got their sneakers on. 

For example: “Fintechs were quicker to recognize the consumer lending niche and improve the customer experience with pre-approvals and quicker funding of loans,” says Marcos Meneguzzi, Head of Cards and Unsecured Lending for Retail Banking and Wealth Management at HSBC USA. And it’s not just about the front end. McKinsey analysis of four large Fintechs estimated that the operating costs of next-gen core mainframes are around 10 percent of the operating costs of traditional banks (more on this later). 

The next generation of customers 

Millennials spend about 30 percent of retail expenditure per year, amounting to 1.4 trillion USD. Gen Z, in their 20s now, controls more than 45 billion USD in annual spending. 

These generations are taking over the financial landscape. And, they are discerning about who they bank with. They’re less loyal. More than 60 percent of Gen Z and Millennials would consider switching banks for better digital capabilities. Younger generations expect transactional timeliness and intuitive, digital systems. Problems caused by a lack of data integration are more than just an inconvenience, a tolerable compromise within the relationship between bank and clientele. To this customer base, they are a major red flag. 

Employee satisfaction 

Eighty-five percent of FSIs say their IT staff spend up to 50 percent of their time helping other staff access the data and insights they require. 

That’s hardly a great experience for IT, nor for the rest of your staff. With a more democratized system and a central point of reference, it is far easier to ensure staff have the right access to do their jobs autonomously. 

This is the tip of the employee satisfaction iceberg. Digital enablement does so much more to improve the work lives of employees. Check out this article on how financial institutions can transform their digital employee experience. 

Insights and innovation 

Integrated data means a clearer picture from ten thousand feet. You can see where things stand and get a more accurate understanding of next steps, trends, risks and potential for innovation. And when you have the right foundation — meaning clean data — for things like hyper-personalization, then you can monetize that data and increase your share of wallet. 

For example, Boston Consulting Group found that “for every $100 billion in assets a bank has, it can achieve as much as $300 million in revenue growth by personalizing its customer interactions.” 

Where to begin your data integration journey 

Your starting point looks like multiple data sources, formats, and systems that don’t speak to one another. Your end goal is a single source of truth that is both stable and adaptable. Getting to that point will take time, and, most likely, will have to be approached in stages. 

Stakeholders need to collectively decide where the key points of incompatibility or potential value creation are. Your mileage may vary. 

However, it’s worth noting that while many FSIs may have invested in mobile and frontend experiences (and rightly so), most have neglected to upgrade their core mainframe systems. Here — particularly in the critical area of books and records — is where operational inefficiencies, misclassification, and inconsistencies reign free. 

“It’s an unspoken fact that most financial institutions (not just banks) run on a 50-year-old mainframe form of IBM,” Bruce Schilder, Open Banking & FinTech Lead for North America at Accenture said in an interview with Modes. 

These “technological monoliths”, McKinsey agree, are the main thing holding banks back from an integrated data ecosystem. Their recommendation? 

“A two-track process: on one, banks accelerate their current efforts to hollow out the existing core; on the other, they experiment with possible next-gen cores until settling on the best one for the eventual migration.” 

How to get to financial data integration nirvana 

Financial data integration projects that tackle core systems are not for the faint of heart. To rise to such challenges, you need two things: the right tools and the right expertise. 

With Salesforce's Financial Services Cloud, you can facilitate instant collaboration from anywhere, securely. This CRM (Customer Relationship Management) platform includes means to track accounts and assets, and, combined with Mulesoft, can significantly reduce the time spent on new integrations. As you join the dots with your existing systems (that’s McKinsey’s “hollow out” route), you clear the path to a fully next-gen core banking system. 

Modes — as Salesforce experts and keen voters for data democracy for all — will support you on your integration journey. Connect with us, and we’ll help you get your data connected in return.