In today’s rapidly changing financial world, data stands out as a valuable asset, particularly for banks striving to meet an ever-evolving regulatory environment. Over the past few years, U.S. banking regulations have become more encompassing and rigorous, a shift clearly highlighted during the American Bankers Association (ABA) conference in New York City. The discussions there focused on the extensive impact of regulatory pressures on the banking industry, a force that continues to transform the sector fundamentally.
Although these regulations are designed with the goal of strengthening the security and stability of financial systems, they often place a hefty burden on banks, especially those smaller regional and community institutions. Consequently, banks, both large and small, have increasingly found themselves in legal battles against regulatory bodies. The challenge is that, while the regulations aim to protect, they often stifle innovation and competition. This is particularly evident as non-banking financial institutions continue to capture a larger share of the loan market without the same regulatory constraints; currently, non-banks hold nearly 80% of residential loans.
This rising compliance burden is pushing banks to seek new ways to differentiate and add value. This is where the strategic use of data can play a crucial role. When leveraged effectively, data is not just for compliance purposes; it becomes a pivotal asset, empowering banks to remain agile, well-informed, and focused on their customers. By using data strategically, banks can regain control over their business models and enhance their competitive stance in a market that’s increasingly challenging for traditional banking.
The Challenge: Overcoming a Crisis in Data Confidence
One major hurdle banks face in utilizing data effectively is a lack of confidence in its accuracy and accessibility. A January 2024 Journal of Accountancy article revealed that around 40% of CFOs worldwide are skeptical about the accuracy of their financial data. This lack of trust is exacerbated by poor data accessibility; many CFOs suffer from limited visibility, often experiencing significant delays due to fragmented data systems. These issues lead CFOs and their teams to spend too much time compiling and summarizing data instead of conducting meaningful analysis.
For banks, this problem is intensified by the unique nature of financial data, which requires specialized, domain-specific software to navigate regulatory requirements and understand industry nuances. Unfortunately, suitable software solutions are often missing or underdeveloped. Inefficient or incomplete data management saps resources and limits the insights CFOs can derive, which in turn impedes a bank’s ability to swiftly adapt to market and regulatory shifts.
A Way Forward: Best Practices for Leveraging Data
To tackle these challenges, banks must adopt a proactive approach to data management, relying on both strong processes and advanced technology. Here are some best practices to consider:
Centralized Data Platforms: These platforms bring together disparate data sources, helping banks eliminate the silos that hinder data visibility and trust. With a unified view of their financial data, banks can make faster, more accurate decisions, enhancing both compliance and competitiveness.
Domain-Specific Software Solutions: Generic data platforms often fall short in addressing the particular needs of financial institutions. Choosing software that understands the complexity of banking data can greatly improve how a bank manages, analyzes, and interprets its data, aligning decision-making with its regulatory and strategic goals.
Real-Time Data Analysis: In today’s climate, banks must have real-time data capabilities to stay ahead of regulatory and market developments. This skill allows CFOs and their teams to spot trends, risks, and opportunities as they arise, enabling rapid pivots and more informed decisions, even anticipating regulatory needs before they become urgent.
Data Governance and Quality Assurance: Ensuring trust in data quality begins with robust data governance. Establishing clear protocols for data collection, validation, and auditing is crucial. Banks that create a culture of accuracy build confidence in data-driven decisions, allowing CFOs to focus on analysis instead of remediation.
Empowering Teams with Self-Service Data Tools: Providing finance teams with easy-to-use, self-service data tools boosts productivity and reduces the need for data specialists. These tools empower non-technical staff to independently extract insights, streamlining the analysis process and improving decision-making agility.
The Bottom Line: Embracing Data as a Strategic Asset
In an era marked by escalating regulatory pressures, banks cannot afford to treat data management as a mere back-office task. Instead, they must embrace it as a strategic differentiator, crucial for achieving competitive advantage and operational resilience. Effective data management allows banks, big and small, to unlock valuable insights, streamline compliance, and redefine their business models to thrive in a complex, competitive environment.
Explore how your financial institution can harness data for a competitive edge with the SS&C EVOLV Finance Hub. Learn how we can help streamline compliance, generate insights, and support your strategic growth in an increasingly regulated landscape.
