Inadequate data infrastructure -- a big roadblock for Asia Pacific banks

It is an understatement to say that the financial crisis in 2008 has forced banks to think and operate differently. Compared with the Western world, many countries in Asia Pacific came out of the crisis much more rapidly. Asian banks have shown they’re able to adapt more nimbly to the changing environment and regulatory landscape, often because they have fewer or less complex legacy technology and policies to overcome, compared to Western banks.

But Asian banks aren’t in the clear. Many lack strong data infrastructure. That’s a big problem.

It’s a priority for these banks to enhance analytics capability—and now is the ideal time to make that investment. The world is gathering more and more data, storage is becoming cheaper, the business environment is extremely competitive, and cost reduction is a top priority in everybody’s mind.

Internal customer behavior data is an untapped goldmine for every company. Mining is the only way to reach that. However to be successful in analytics, having a good data infrastructure is a must. As little as 10 years ago, banks could survive and make money without investing in a good customer database. In today’s volatile financial world, this is suicidal.

Customer-centricity, cross-sell, up-sell, retaining the best customers and right product at right time throughout the customer lifecycle are the industry buzz these days.  But all of that can’t happen if one doesn’t address the basic issue of functional data infrastructure.

In the aptly named “Industry Research Prediction for 2011: Bank and Investment Firms’ Core Application and Application Infrastructure are at Risk,” Gartner reports that banks are making progress with core application modernization, but will struggle to execute these projects successfully in 2011. During the next several years, Gartner expects that catastrophic system failures—those that cause substantial business disruption—will force banks to reconstruct their approaches to core applications and core application infrastructure.

Inadequate data infrastructure is a harsh reality for many banks and FIs in Asia Pacific. This creates a major roadblock for intensive analytics activity, which many believe is a major growth driver. Sometimes large IT vendors, who are the primary service providers for DWH/data mart creation, end up creating infrastructure that is extremely complex and not user friendly. This happens primarily because of the lack of appropriate business input while creating the infrastructure.

Banks and FIs need to address this quickly and, if necessary, solicit professional help to provide essential business inputs to IT companies, in order to create state-of-the-art, simple, user friendly data infrastructure.

According to a Gartner report, the forecast in IT spending in 2011-2014 in Asia Pacific will be more than 6% annually, the highest among all regions worldwide.  If all that money is not spent wisely, true analytics maturity may end up being a mirage.