By Chris Probert, partner and data practice lead at Capco
Banks have always held vast amounts of data within their organizations but with the recent exponential growth in data volume, efficient usage and governance of data has become firmly established as a source of competitive advantage for financial institutions.
The ability to identify, monitor, interpret, and extract value from data is something that many organizations have historically struggled to achieve, mostly due to poor tracking of data across the enterprise. Data lineage serves as a tool to track data from its origins, through any transformations it may undergo to its ultimate consumption.
Financial institutions have an opportunity to provide major value to their organizations by using data lineage to provide benefits along three dimensions: regulatory compliance, control optimization and cost reduction.
Why data lineage – stopping Chinese Whispers
To understand how data lineage is useful, it is important to acknowledge the obvious: data in a large organization is not held in a single repository, but rather flows across many systems and databases. During this proliferation there is a risk to data quality, security and availability. For example, as anyone familiar with the game of Chinese whispers knows, despite best intentions an original message can swiftly metamorphize into something completely different as it moves down the chain from person to person.
Information is no different – data can become compromised every time it enters a new system or database. Data lineage offers a solution to this issue, as it allows compromised data to be hunted down efficiently and quickly.
Traditional data lineage and challenges
Data lineage rose to prominence due to requirements in the wake of the financial crisis as regulators sought evidence to substantiate the veracity of stress-test reporting for banks. Since then, regulations such as Markets in Financial Instruments Directive II (MiFID II) and General Data Protection Regulation (GDPR) among others, have required financial institutions to implement data lineage procedures to demonstrate the reliability of their reporting.
However, data lineage is currently underutilized. It largely focuses on the mechanical movement of data and less on its contextual flow; furthermore it is often targeted towards an IT audience, mapping technical data. In falling back on this traditional approach to data lineage, businesses are not tapping its full potential: namely, the insights provided through enhanced clarity around data movement and transformation.
For data lineage to be meaningful beyond mere regulatory compliance, traditional lineage must expand to address the following dimensions: who, what, where, when, why, and how. Establishing industry standards or accepted practices would help provide a structure for capturing these different dimensions and drive business value.
Three ways to make lineage useful
A big challenge facing organizations that want to use data lineage is the lack of standards around its depiction. There are significant differences how lineage is represented, ranging from spaghetti diagrams –which prove overwhelming to a business audience -through to process diagrams that often leave out data and technical representations of architecture and infrastructure that obfuscate the nuances of transformation.
There are three critical guiding principles to make data lineage useful and standardized: make it business friendly; highlight context and ownership of data; and show how data is transformed and used.
Making data lineage more attractive to businesses can be achieved by ensuring the presentation of lineage is easy to read and understand via business-centric nomenclature and easy-to-consume forms and applications. It is also important with data lineage to show only those elements that are critical to the output, or would impact the quality of the output if compromised. These are typically referred to as ‘critical data elements’ (CDEs) or ‘key data elements’ (KDEs).
The next step is understanding the context of the data – vital to setting up standardized data lineage diagrams. Organizations need to start by determining the connections that show who owns the process, the application, and the data element. Given the size and complexity of financial institutions, this can be a gargantuan undertaking. Once the data ownership structure has been established, the enterprise can begin to align the process and create a visual diagram of data lineage.
Visualizing the process by looking at the connections – application ownership, process ownership, data quality, data usage, access requests and the number of outstanding data issues – can help drive improvements, identify risk, and strengthen process governance.
Once each step is documented and unique data elements identified and validated by the relevant subject matter experts, an organization will have clarity around ownership of each stage of the process and the associated data elements. The enterprise will then be able to leverage process diagrams to better understand what happens to the data, not least how it is transformed and used throughout its lifecycle.
It is essential to know how data is moving, not just where it is coming from and going to. In determining the ‘who, what, when, where and how’ of data flow we can answer questions related to risks, whether they can be mitigated and the efficiency or otherwise of existing data management and processing systems. This leads to a more secure and streamlined data flow.
Cutting costs and boosting efficiency
Using data lineage, financial institutions can easily visualize the flow of data through systems and applications, making it allowing distinct patterns within an organization’s data – be they good or bad -to be identified.
Via data lineage organizations have an opportunity to optimize costs and processes by minimizing repetition and redundancy within their systems. For example, during account set-up an organization can end up with three separate applications performing just one function. Wherever data is handled by multiple applications for the same task that should serve as a red flag. This kind of pattern occurs often in organizations undergoing rapid growth through mergers and acquisitions or the launch of new products and services.
Without data lineage inefficiencies can remain hidden, leading to wastage due to improper data visualization and a lack of insight into applications. Data lineage allows organizations to clearly align“ business area” “process” and “applications” using visual diagrams that create a holistic picture of data management across the enterprise.
Once a redundancy in data processes is discovered, organizations can rapidly eliminate the associated wastage by enhancing one application to handle all closely related functions while retiring the rest.
Patterns for risk management
Determining where to implement controls within a given data supply chain is crucial for maintaining data quality and integrity. Data lineage techniques can quickly identify inefficiencies and risks that arise in common data control methods.
Two types of controls play significant roles in maintaining the quality of data. The first is an accuracy control, which is best implemented at the system of origin (where data is first created or entered). The second is a consistency control, which supports and maintains the accuracy of the data throughout the entire data supply chain. The recommended implementation of the consistency control is in applications downstream from the system of origin.
These two controls, when effectively maintained, will reduce in efficiency and duplicate controls, thereby improving data quality. However, organizations often unnecessarily build multiple accuracy controls into downstream systems. A classic example is a data warehouse or data lake where consistency controls would be the better choice. This leads to data in the warehouse or lake to diverge from the system of origin, creating a maintenance nightmare and leading to cost increases.
Data lineage allow organizations to make the correct choice between which applications require accuracy controls and which need consistency controls. If controls have been already implemented, it will highlight any redundancy, allowing the organization to optimize on controls and save costs.
As data flows from one application to the next within an organization there is an inherent security risk. The most vulnerable applications are those that are external-facing or vendor-hosted. Data lineage can spotlight such applications and in doing so lift the veil on security risks. Existing data controls can be reassessed and enhanced as necessary, reducing cyber risk and protecting data as it moves across the enterprise.
Data lineage will continue to evolve. At the same time, its power to help organizations think more clearly about their data, control frameworks and process optimization is yet to be fully realized.
Financial institutions that successfully leverage data lineage will drive value through cost reductions arising from the elimination of redundancies and unnecessary manual processing – and hence while simultaneously mitigating risks related to data quality, integrity and security via better controls.
Adopting common standards and injecting contextual content will facilitate the implementation of lineage in a business-friendly fashion and spur adoption. In today’s world of Big Data, data lineage offers organizations quantifiable business value as they move towards harnessing data as a source of competitive advantage.
Over a quarter of Brits now have an account with a digital-only bank
The number of Brits with a digital-only bank account has gone up by a percentage increase of 16%
Almost 1 in 6 Brits (17%) plan to open a digital bank account over the next 5 years
The top reason for opening an account was the convenience of banking online for the third year running
However, 16% of traditional banking customers who aren’t planning to switch said their bank had been helpful during the COVID pandemic
Currently over a quarter of Brits (27%) say they have at least one bank account with a digital-only bank, according to personal finance comparison site finder.com.
This is a percentage increase of 16% from last year when 23% of Brits said they had an account with a digital bank. It is also over 3 times the amount of Brits who had one in January 2019 (9%).
Finder’s 2019 research found that 24% of Brits intended to have a digital-only account by 2024. However with 27% now having an account, Brits have gone digital 3 years earlier than expected.
A further 17% of Brits intend to join them over the next 5 years, with 11% planning to do so over the next year. This could mean that 44% of Brits could have an account with a digital bank by 2026. If this percentage were applied to the UK adult population, it would equal almost 23 million people.
The top reason for opening an account continues to be convenience that digital-only banks provide, for the third year running (26%). The second most common reason was that users needed an additional account and setting up a digital account seemed to be the easiest option (20%). Customers also wanted to transfer money more easily (19%), making this the third biggest priority.
People wanting a trendy card is still driving signups as well, with 1 in 10 (10%) existing, or future, customers citing this as a reason to get an account.
Despite the increase in digital-only banking customers, the numbers who aren’t considering one have actually risen. Last year, 23% of respondents said they aren’t considering a digital-only bank account, but this has risen substantially to 42% in the latest survey.
This is likely a result of increased customer loyalty, 58% of those without a digital bank account said they felt as though their incumbent bank had treated them well and therefore had no desire to open a digital bank account. Additionally, 16% felt as though their incumbent bank had performed particularly well during the pandemic.
Over a third (36%) of those without a digital bank account said they had not decided to bank with digital providers because they preferred to be able to speak to someone in branch.
Digital banks are still most popular with younger generations, 46% of gen Z say they currently have a digital bank account, with a further 28% intending to get one over the next 5 years. This would mean that by 2026 just under three quarters of gen Z (73%) could have a digital bank account.
To see the research in full visit: https://www.finder.com/uk/digital-banking-adoption
Commenting on the findings, Matt Boyle, banking specialist at finder.com said:
“This research shows that digital-only banks are here to stay, with the number of users in the UK rising for 3 years straight. On top of this, Starling and Revolut announced this year that they have made a profit for the first time, really demonstrating that digital banks are starting to become a serious part of the banking furniture.
“The pandemic has also played a role in the rapid digitalisation of the banking industry, with those who had never experienced online banking having no other choice but to take their finances online. It seems that Brits are starting to realise the convenience that can come with digital banking and this is reflected in our research.”
Finder commissioned Censuswide on 6 to 8 January 2021 to carry out a nationally representative survey of adults aged 18+. A total of 1,671 people were questioned throughout Great Britain, with representative quotas for gender, age and region
The Impact of the Digital Economy on the Banking and Payments Sector
By Gerhard Oosthuizen, CTO Entersekt.
New banking regulations, digital consumers, the eradication of passwords, contactless technology – these are just some of the trends that will shape financial services and payments in 2021, writes Entersekt CTO, Gerhard Oosthuizen.
Since the outbreak of COVID-19, traditional businesses have been compelled to further undergo the digital transformation to meet the needs of a consumer base largely confined to their homes. Indeed, we estimate that there has been a 30% growth in the digital space. With this acceleration towards a digital world, banking, transacting and payment trends have and will continue to be redefined into 2021.
We have witnessed a rising number of digital first timers. That is, people signing up for online banking and e-commerce, whilst progressively shifting away from traditional channels. Businesses that have previously depended on walk-in stores and having a physical presence have also had to recognise that online transactions are now the new norm, and to adjust accordingly.
Whereas in the past, registering a customer for a service could take place in a shop, a booth or a branch, today it has become more important than ever to have a remote digital registration option available as well. Even working behaviour has changed considerably, with many businesses accommodating for remote working in the long term.
This is what sets the scene for 2021 – people expect to work from home as well as carry out their transactions from home.
Banking and Payment Trends in 2021
The use of contactless technology is undeniably growing, but on top of more people tapping with their cards, we are also seeing much more engagement with QR payments. A technology already frequently employed in Asia, we know QR codes can work. It would enable consumers to authenticate themselves when making a transaction without needing a PIN pad. More importantly, it allows consumers to gain complete control of their transactions from their own device and have an overall richer experience. Recognising this, we anticipate noteworthy developments in QR and NFC-enabled tap and go payments over the next year.
In light of FIDO (Fast Identity Online) and the ever-expanding network of FIDO-compliant solutions, we also expect the emergence of entirely passwordless systems. Organisations will likely begin enlisting customers by way of biometric authentication through devices and digital identities that already exist, such as banking apps. Long gone will be the days of having to remember numerous passwords, only to forget and reset them again. That is the idea anyway.
In 2021, there will probably be a pronounced adoption of delegated authentication as well, whereby
merchants as opposed to traditional issuing banks will take the reins of authenticating e-commerce payments. In this way, consumers will be offered a greatly improved online shopping experience with a simple and intuitive checkout that acts as an extension of the retail brand.
The Challenge of PSD2
While each of these transitions will undoubtedly introduce growing pains, PSD2 will be among the most challenging. Europe is already going through PSD2 now, implementing a number of regulations that is opening up competition in banking and electronic payment services. However, on the 1st of January 2021, these regulations will take a legal effect. At the end of the first quarter, so too will another set of regulations concerning 3-D authentication of card-not-present payments. Europe is simply not prepared to make this leap into “open banking”. As such, banks will face a tough year of struggles with regulators and competition from non-traditional quarters.
In fact, the process towards becoming PSD2-compliant is often arduous for banks and recoups hardly any additional revenue. Many banks see it as a competitive disadvantage as they are being forced to open up their systems and processes for the likes of Google, Facebook, Apple and many smaller niche fintech operations. Their valuable client data risks being taken by a challenger and used to on-board their accountholders.
Regardless of the commercial opportunities that open banking may provide, fraudsters will also endeavour to take advantage of this change and the weaknesses that will appear as systems open. With money moving faster, the faster it can be stolen too. We will likely see some reaction to this in 2021 as fraud returns to being a top priority for banks. Yet, whether through regulatory pressure or by market forces, open banking will become the new normal – and the world needs to prepare for this. Hopefully, many lessons will be learned from Europe’s experiences in 2021.
Next year is going to be about change – and managing that change without alienating already unsettled consumers. Organisations that have customer experience top of mind will emerge as winners, but they must nonetheless expect additional pressure from regulators, new competition, ever more digitally-demanding consumers, and no slowdown in technological innovation.
Protecting the digitally-excluded: biometric identification ensures access to payments in a cashless world
By Vince Graziani, CEO, IDEX Biometrics ASA
The events of this year have exacerbated a number of challenges for vulnerable members of our society. Fears over health have been compounded by the accelerated digitisation of activities in their daily lives, such as video calls with family, shopping online and mobile banking – activities they may have already been daunted by. Chief among these evolutions has been the pronounced lean away from the use of cash. With many not comfortable with the complexity and security of digital payments, banks must explore an alternative in the form of biometric identification.
COVID-19 and subsequent lockdown restrictions have not only made the handling of cash difficult, but even unsanitary. As a result, many retailers have either stated their preference for digital payments, or indeed forbidden the use of cash during transactions. As a result, the UK cash machine network, Link has reported a 55% drop in ATM usage over the course of 2020.
Meanwhile, in the US, a similar decline in cash has led to a rapid rise in digital payments and mobile payment apps, thanks to comparable regulations and an increase to the contact less payment limit of up to $250. According to recent research, 28% of US shoppers would avoid a retailer that doesn’t offer contactless payment options. That hesitation is causing a shift to digital payments, with the US mobile payment market expected to rise to $130.3 billion in 2020.
When the adoption of technology is accelerated so suddenly, it’s understandable that those vulnerable, older or even just reluctant and sceptical members of society aren’t thought about enough. The resultant fear of leaving vast swathes of people behind means we need a new touch-free payment solution that helps to comfortably and securely bridge their transition away from cash.
Who fears the transition, and why?
The idea of digital exclusion isn’t necessarily a new concern. In the UK, Which? has long been calling on the government to protect cash as a payment option, knowing that its eradication could negatively affect vulnerable members of our society.
Despite the concept of going cashless advancing, as many as 27% of UK consumers still operate only in cash, while across the Atlantic, 70% of US citizens regularly use cash. Looking globaly, research by the Global Index has explored the nascency of countries including India, Mexico, Nigeria and Pakistan in transitioning from cash to a digital banking system, finding that 1.7 billion adults around the world lack a bank account, while around 1 billion still pay their bills in cash.
Across the board, there is also a notable percentage of consumers who, while being banked, may struggle to maintain their financial independence. Old age or physical and mental health limitations can make the current transition difficult.
What if you can’t remember your PIN or your online banking password, or even your signature?
Banks must be aware that a wholesale veer away from cash isn’t going to suit or benefit all of their customers. They must therefore seek alternative options that still adhere to the trajectory towards touch-free payments, while addressing the above digital exclusion challenges that some will face during this transition.
A secure and convenient payment option
Rather than making payment transactions a game of memory or self-controlled security, the banking sector should look towards the benefits of biometric authentication. When incorporated into a bank card, fingerprint authentication offsets the need to put people under pressure to note down, secure, remember and then input various passwords, PINS or usernames. Instead, biometric authentication, through fingerprints, automatically and categorically links a person to their finances in the most understandable and seamless way possible.
For retailers it would ensure that the evolution away from cash can continue seamlessly; also meaning they’re less likely to lose out on an entire segment of the customer base. But, more importantly, for consumers, it provides a more safe, secure, immediate and convenient payment method that balances the positives between cash and digital payments.
It’s an ideal balance that relieves pressure on the digitally excluded. Vulnerable members of society will firstly be spared from a growing need to invest in expensive smartphones, or to learn complex digital banking features in order to carry out purchases.
Additionally, at a time where cash is potentially harmful to health, and equally at risk from a security perspective in the longer-term, they are able to make a safe step forward without any of the innovation headaches that might come with it.
The enrolment of biometric payment cards can even now take place remotely in people’s homes, making the transition even more seamless than the idea of extracting cash from ATMs.
Going beyond payments, biometric smart card solutions can also serve as the direct and unequivocal identification many would need to open a bank account, build credit and enhance their financial footprint, as seen in India’s Aadhaar biometric ID programme.
The solution to a prolific challenge
As we move away from cash and towards a world of digital payments, biometric payment cards provide the ideal balance of security, convenience and hygiene for touch-free transactions, without having to rely on expensive smartphones, mobile banking, or PINs.
Banks and payment providers must now embrace biometric payment cards to provide consumers with a secure and easily accessible means of touch-free payment. In doing so, financial exclusion will be one less critical factor to worry about as we transition to a cashless society.
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