Why Every Bank Needs Modern Master Data Management: Benefits and Insights

2024 brings lots of optimism, opportunities, and challenges to the banking and financial services industry. Firms large and small continue to invest in digital, cloud, analytics and artificial intelligence (AI) to find ways to improve customer experience, grow revenue, manage risk and comply with industry regulations all while looking for ways to reduce the cost of doing business. Across sectors and geographic markets, there is also a steady rise in mergers and acquisitions as weaker firms are taken over by larger firms or end up merging with others to survive and compete in today’s highly competitive, cost-conscious and highly regulated industry.

To succeed, banks require “Fit for Business Use” data. This means data that is:

• Accessible to and from the systems and applications that run your business
• Clean and trustworthy to support critical business processes and decisions
• Valid and relevant to your customers, accounts and overall business relationships
• Transparent to ensure you have end-to-end visibility into the lineage of your data
• Governed to support proper use of existing data by all
• Understood by every business user regardless of their role or tenure

Master Data Management (MDM) is both a practice and a technology that plays a critical role in ensuring data is unified, accurate and trustworthy. As a technology, MDM creates a single master, or golden record, for each person, place or thing that’s important to your business, using internal and external data sources and applications. Once the data has been brought together, it’s standardized, de-duplicated, reconciled and enriched to provide an authoritative and consistent source of information. The relevant master data can then be shared across the business for operations, analytics and AI to facilitate accurate reporting, reduce data errors, eliminate redundancy and help your team make better business decisions.

Providing a Trusted View of Data

MDM has long been used by leading financial institutions to  consolidate customer data, account data and other data from multiple sources into a trusted single view. This helps banks deliver on the promise of personalized marketing, improved customer service and targeted product offerings. With a unified view of customer data, banks can more effectively identify cross-selling and up-selling opportunities. This is made possible by understanding customers’ households and business relationships, tailoring product offerings to meet needs and increasing loyalty and satisfaction.

Enabling Compliance and Risk Management

MDM can help banks ensure ongoing compliance with industry regulations and strengthen risk management practices. Operating in a tightly regulated environment, banks must adhere to various regulations, including BCBS 239, CCAR, FR2052a, KYC (Know Your Customer) and AML (Anti-Money Laundering). MDM facilitates advanced analytics by providing a reliable database to enable more sophisticated modeling and simulation of various liquidity risk scenarios, including stress testing. This provides a better understanding of vulnerabilities under different conditions and reports liquidity positions with greater accuracy and efficiency to regulators and internal stakeholders.

Powering Investment Decisions With Advanced Analytics

MDM solutions also play a crucial role in ensuring that investments in AI and machine learning (ML) yield tangible business value. With the help of MDM, investment banks can leverage advanced analytics, AI and ML algorithms to gain deeper insights into market trends, investment opportunities and customer behavior. MDM supports these initiatives by ensuring that the underlying data is timely, reliable and comprehensive, which leads to better outcomes from analytical models.

Consolidating Data for M&A

Finally, MDM helps mergers and acquisitions by consolidating relevant data, supporting effective decision-making and enabling a single source of master data. This accelerates post-merger application consolidation, integration and migration efforts and delivers value to customers, employees and shareholders.

As a well-established discipline and technology, MDM is used in the banking and financial services industry to deduplicate customer data, unify it across systems and share it across operational and analytical systems. Many existing MDM solutions, either built or bought, have been operational for over two decades to overcome the many data challenges across business silos. Because of this, many businesses still rely on older software solutions and are maintained by technology organizations but are no longer being used actively. These solutions were designed to handle data challenges from 20 years ago and are not capable of managing millions of records across dozens of systems, whether they are on-premises or in the cloud.

Enhance cost efficiency: Legacy on-premises MDM solutions can be expensive to maintain and upgrade.

Improve performance: These solutions also struggle to keep up with the increasing demand for mastered data across all systems and lines of business.

Gain the agility of advanced technology: The demands of today's customers, regulators and market trends mean that banking and financial services organizations require an MDM solution that is AI-powered, flexible, open and scalable and that leverages a modern microservices architecture to support a wide range of on-premises, cloud and hybrid systems.

Leverage a business-focused solution: Legacy MDM solutions were not designed for business users to manage and steward their master data, making them more of a technology-focused solution than a business-focused one.

Modern cloud-native MDM solutions, like Informatica Intelligent MDM and Informatica Customer 360, provide an all-in-one microservices architecture with underlying graph technology. They employ AI/ML technologies to improve matching, map data sources and business entities to the solution, identifying unique records and relationships across millions of records in a short amount of time. This makes them more scalable and efficient, as well as more accessible to business users.

Want to learn more about AI-powered, Cloud Native Master Data Management services on Informatica Intelligent Data Management Cloud?

Informatica is excited to invite you to our annual MDM & Data Governance Summit in New York City on February 29 and in Toronto on March 5. Our event features a fantastic lineup of speakers and panelists from Informatica, partners and customers, including a significant presence from the financial services community. Learn more about each event and register today. We look forward to seeing you there!

For those who cannot attend in person, you can attend one of our virtual events on March 13, March 26 and April 4.