The benefits associated with the collection and cultivation of customer data are becoming increasingly clear to financial institutions across the world, but none more so than on the African continent.
Despite this realisation, many continue to find themselves battling with rigid, traditional forms of data automation. In this guest post for The Fintech Times, Bernard van Niekerk details the importance of comprehensive data, the challenges faced by African banks, and the new age digital models that could be utilised to overcome them.
Bernard is Managing Director of RadixTrie, a business specialising in data and services management, including Data Store, Data Flow and Data Evolution. RadixTrie provides standardised packaged solutions for effortless implementation and rapid adoption to deliver real business results.
The time has come for banks across Africa to develop specific data management and analytics strategies that are customised and appropriate for local conditions and regulatory frameworks. In many cases, existing models, originally imposed by parent banks from outside the country, are no longer fit for purpose locally.
This comes in the context of the rapidly evolving digital world of international business in the Covid era, where data is receiving increasing attention, not only in the financial services environment but also in a wide range of other industries. Given the potential value of data today, it comes as no surprise that many call data the “new oil” of the 21st-century economy.
For banks specifically, data helps identify new business opportunities as well as retain customers and acquire new ones, thus building a competitive advantage in the market. Data also enables banks to optimise and streamline internal processes, improving performance and reducing operating costs. Risk management is improved by providing data that is required by regulators and by developing and assessing customer risk profiles to enhance fraud detection and improve credit management.
The world of technology is changing rapidly and the need is to provide fit-for-purpose solutions for banks with low cost of ownership and that adhere to global standards. In our experience with data management and data analytics we have found that vast quantities of data assets within most organisations remain undiscovered and unexploited.
Why, then, is there a call for a brand-new look at data management and data analytics in African banks? One reason is that many African banks have data management systems that were imported or imposed from outside, often with serious downsides in the African context. Why is this?
- Different banks have different internal circumstances and often lack specific expert skill sets.
- Legislative environments differ from country to country.
- Costs around centre and industry-compliant data management systems are often high.
- Centre standards are in most cases not “downwards scalable” and assume that a “one size fits all” solution will work in every bank.
- Infrastructure availability and requirements differ city by city and country by country.
I would advocate that African banks need a “federated IT model” that can be applied to data management and data analytics and tailored to the specific needs of the bank, and unique circumstances of each country. This model:
- Provides an environment where both autonomous regional IT units and a centralised IT unit share expertise and find synergies to accomplish broader IT objectives for the whole organisation.
- Builds architectures adapted to the particular data volume and skills level of the bank in question.
- Creates an agile data management strategy that retains its integrity regardless of infrastructural challenges.
- Results in IT solutions that are scalable from large central banks to small regional African banks.
- Uses existing systems that require locally available IT skills, thus reducing costs.
- Employs technology partners that invest in skills transfer to improve independence and reduce reliance on outsiders.
Strategic Importance of Data
The strategic importance of data and the wide availability of tools available to probe it, make it an ideal time for African banks to develop their own data analytics strategies uniquely tailored to their environment. We personally love the opportunity to apply a custom solution that aligns with centre standards that addresses the local compliance and regulatory requirements of a particular country, but also takes cost effectiveness and local skills availability into account. Using our extensive experience within the South African banking sector, there are smart ways to make real, measurable differences to banks in the African region.
This process includes:
- Automation of complex data management tasks that negate the requirement for expensive experienced staff.
- Working with local teams to build and transfer key skills within the organisation.
- Installing systems that comply with local regulations, norms, and practices and also aligns centre standards, ensuring overall organisational compliance.
- Offering banking solutions that are cost-effective and affordable.
- Offering flexible service arrangements that vary depending on changing requirements. The programme sets up systems according to client’s requirements, automates complex maintenance tasks, transfers the required maintenance skills, and provides skills augmentation support.
- Offering a remote monitoring and assistance facility after the initial task is complete and providing efficient 24/7 support.
The results of this approach retain the integrity of local banks and their ability to operate within their countries and their own specific contexts, while enabling integration with the systems of a parent or central bank. The key is the spirit of partnership.