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How this new industry standard will accelerate financial data sharing in the cloud

How this new industry standard will accelerate financial data sharing in the cloud 1

By Matthew Glickman, VP of Customer Product Strategy and Global Head of Financial Services, Snowflake

Financial services organizations are keen to mine insights from a growing number of data sources but are held back from sharing data freely because of limitations in their existing IT infrastructure. A new industry standard promises to change that by making it easier for financial services firms to manage data in the cloud, opening the door to a tidal wave of new service and product innovation.

Cloud services can ease the technical burden of sharing data by shifting the responsibility for building, securing and maintaining data pipelines to cloud managed service providers. Until now, however, financial organizations had no way to verify that cloud providers meet their strict requirements for governance and security. The CDMC standard, finalized this year by the cross-industry EDM Council, addresses those concerns.

CDMC defines a set of best practices to ensure that cloud environments meet the security and governance needs of regulated industries like financial services. The standard was developed by a working group co-chaired by Morgan Stanley and Refinitiv, with participation from more than 20 leading financial institutions along with the biggest cloud providers.

The standard isn’t limited to data sharing and addresses broadly the needs of financial services firms as they move more of their operations into the cloud. But data sharing is a critical area where financial businesses can better meet the needs of their customers, and a standard that accelerates their shift to the cloud will dramatically speed their ability to consume and share data with a wider ecosystem of customers, partners and other stakeholders.

Historically, data feeds in and out of organizations have typically been developed as bespoke, individually managed pipelines. Banks and other finserve companies are under intense pressure to innovate and compete better with a new wave of fintech startups, yet they’re effectively doing so with one hand tied behind their back.

Cloud data platforms address this by assuming the technical burden of sharing and securing data within and across organizations. Cloud providers must verify their adherence to the standard through an independent third party. I’m happy to say that my own company has become the first cloud provider to be assessed against the CDMC key controls  and I expect many others to follow.

CDMC unleashes a world of possibility by accelerating the pace at which financial companies can migrate their operations to the cloud. An important result of this is liberating financial data from technology and institutional silos, allowing firms to generate new revenue streams through future-forward products and to collaborate more broadly across the new data economy.

What does this mean in practice? This can help in obvious ways like making it easier to share data between departments within an organization. But more than that, it will allow the entire industry to become more tightly interconnected and to share data in new ways with customers, partners and regulators, opening the door to some truly game-changing services.

Take combating fraud as an example, which today is infinitely harder than it needs to be because every financial institution is trying to solve this problem alone using their own data. With the ability to aggregate data from multiple entities and observe all the activity happening in banks and payment processors, there’s a lot more signal that can be harnessed to identify and combat fraud.

This model has been applied in the security industry, where trusted third-party providers study activity across participating businesses to identify threats. With a secure mechanism to share financial data in the cloud, a new generation of service providers can alleviate the burden of fraud detection for financial institutions – and do so more effectively because of the wider aperture they gain. This will require significant cooperation and buy-in, but the CDMC lays the groundwork of trust for these services to be developed.

Another example where data sharing in the cloud can play a much bigger role is in Environmental and Social Governance (ESG). Institutions that manage pensions and sovereign wealth funds, for example, are under pressure to ensure their investments meet the new ethical and environmental standards that investors and regulators are demanding.

This information is hard to ascertain today. How can a fund know if a particular business has a positive environmental score, or does business with ethical overseas suppliers? These issues are not well-defined, but there are third parties that are keen to consolidate this information and act as scoring authorities to the industry. The CDMC standard establishes the baseline of trust required for these shared data services to be developed. 

These are just two examples of how data sharing in the cloud can allow financial services firms to shift their focus from building necessary but undifferentiated IT services towards the type of innovation that allows them to compete and grow. 

There are now a multitude of third party data sources in the cloud that can be leveraged to improve their predictive analytics and offer more personalized services to customers. In the Snowflake  Data Marketplace, there are more than 650 live, ready to consume data sets from providers such as S&P Global, FactSet and Knoema. 

Incorporating this data allows financial services companies to improve their predictive analytics and deliver hyper personalized services to customers, but they need a way to ingest this data in a frictionless way. Managed cloud services make this possible, and the CDMC is a critical step in paving the way to a more complete cloud migration for the finserve industry. I encourage you to explore and join the EDM Council if you have not done so already.

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