Why Does Your Financial Institution Need a Data Management Service in 2023?

Data Management Chart on iPad
(Last Updated On: December 23, 2022)

Try to get through a day without referencing, discussing, or processing data. Did you get anything done? It’s highly unlikely. Data is crucial to the operation of your financial institution.

It wasn’t long ago that decisions were made based on guesses by your long-time staff, predictions, and straight-up “gut” instincts.

Those days are long gone (if you’re still operating that way, this article is really important). Modern institutions are dependent on data for survival and growth. From reporting to loan processing, marketing campaigns to member outreach, you need quality data.

There’s even a name for it: Data-driven business intelligence.

Ok, I’ll get my Star Trek: TNG Data reference out of the way here.

How smart is your data?

Handshake Through Computer Screen with Digital Hand
No comment on if this is appropriate social distancing. Or malware prevention.

Trick question. Your data is neither smart nor dumb. Like Commander Data (couldn’t resist), it’s about the people who contribute to its existence. In other words, your data is only as good as what’s been entered, the platform it’s on, and the ease of pulling it up when needed.

That leaves plenty of room for problems. At times, you won’t be able to get what you need. In other cases, your data won’t be trustworthy. Neither create an environment driven by data. And then there’s the perceptions you (unintentionally) create:

Back in 2017, Credit Union Times called out credit unions on data shortcomings. Their survey discovered that 59% of members felt Netflix, Amazon, and Zappos “knew them better than their credit union”. Think they’ve collected more or less data since then?

We want to help change this situation. We also recognize that dealing with data can be overwhelming.

This article will help you understand:

  • Some data management issues financial institutions like yours face
  • Where your data can be, and how the cloud can bring massive advantages
  • What is a “single source of truth”
  • The difference between a data warehouse and a data lake
  • Why getting a handle on your data matters to your institution

Whew! Sounds like a lot. Not to worry; it’s all approachable. We will help you learn to make decisions using trusted, organized, and easily-accessible (and visualized) data. Especially in today’s accelerated digital ecosystems, the key to it all is data.

And we won’t leave you hanging about where the next “0” or “1” should go.

Along with the article goals, you’ll build a basic grasp of an agile data analytics and business intelligence system. Sounds smart!

Let’s start with common data issues.

“Dirty” Data

Telephone Line Pole
Organized chaos isn’t organized.

In Dirty Dancing, dirty is fun. And nobody puts Baby in a corner. Dirty data is no fun at all. In fact, data management companies report a lack of data governance as the #1 issue at financial institutions. Bad data, not dancing. Ok, maybe dancing, too.

Dirty data in means dirty data out. And that’s a problem for everyone.

Your data is entered, moved, and managed by humans. As imperfect creatures, our mistakes translate to issues with the data. We heard one story where an analysis found the US to have 55 states. News to me! And news to the financial institution, too.

When you can’t trust your data, you can’t rely on it for much. And as you’ve grown, many opportunities for such issues emerge. Every core change, LOS switch, online banking platform transition, and any other service addition, modification, or removal is a culprit.

At each point, the rules and expectations for entering, storing, accessing, and backing up data were likely different. But the data is just that, information. It doesn’t care and only exists to be. It’s up to your institution to ensure datasets A, B, and C all live amicably together.

Even better, if those datasets are all really just different views on the same data.

Which brings us to information silos. Something I’m sure you don’t have.

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Grain Silos
Great for grain. Bad for data.

Each department needs access to certain data. And all of them want it presented in a way that makes their jobs easier. Lending needs loan data. Marketing wants data on product penetration. The CEO wants overall summaries of all departments for strategic planning.

From a strictly information standpoint, a lot of these tasks use the same pieces of data. But they’re in separate systems to work best for the selected goal. This means as your total dataset grows, both overlap and duplication increase.

That wouldn’t be a problem if they were still connected, but who knows what they are? Such a situation can lead to some versions getting updated or fields changed, while the “original” sits in another system, untouched.

Then, when you put it all together, there’s separate versions in different databases, which is one way you get 55 states of varying abbreviations. At that point, not only is the data challenging to use, it’s not trustworthy.

As that duplicated or similar information ages, more inconsistencies emerge between departments. Which you don’t even realize, since the silos keep anyone from comparing.

And that’s not just good old us saying it. According to Talend, a data management firm, silos simply hold you back from getting an institution-wide view of hidden opportunities or threats.

They’re the second largest issue with data management at financial institutions.

3 Primary Disadvantages of Silos

Working with your data should be easier than getting through here.

Having the same information in different places is a recipe for trouble. Here’s three of the main disadvantages a siloed institution can experience:

  • Analyzing Data: Information may be stored in different formats not consistent or compatible with each other (Example: Year stored as both 2 and 4 digits.). You’ll need to commit time and resources to standardize the data to make it usable and trusted.
  • Access Control: Each silo may have different security and access levels. While reasonable from a staff permissions perspective, this can make getting the data you need at an institution level time-consuming or just impossible.
  • Unnecessary Duplication: If your data is in silos, separate departments cannot see what others are editing, when they finish, and what’s changed. This lack of visibility across channels leads to lost time, increased effort, and data confusion.

Silos Hide Your “Big Picture”

Each silo you create is a new obstacle to viewing a complete, holistic view of your institution and its operations. Existing ones prevent the “big picture” from being visible at all.

Imagine if all your financial institution data was installed separately on every staff member’s laptop. How long until everything would be unmanageable? Seconds? Hours? After a day, could anyone even reconcile all the isolated changes?

That’s what your institution is doing with their current silos. A data management system reviews everything you have, finding every silo and merging their contents. Then, they painstakingly go through and correct any issues. Good data. No more silos.

Which brings us to how your data gets stored. No, we’re not using USB drives to move it around anymore. The next section explains the cloud, what “cloud-based” means, and its advantages over local and even remote server solutions.

The Cloud: Here, There, and Everywhere

Cloud Diagram

Is a cloud-based server really somewhere up in the sky? Or in orbit above the planet? Perhaps it’s just another Elon Musk pipe-dream come to fruition?

Nope. Ok, that’s not entirely true.

According to Cloudflare (and they would know…it’s in their name!):

The “cloud” refers to servers that are accessed over the Internet, and the software and databases that run on those servers. Cloud servers are located in data centers all over the world. By using cloud computing, users and companies don’t have to manage physical servers themselves or run software applications on their own machines.

The cloud is just “someone else’s computer”. Ideally, it’s someone who really knows how to operate, maintain, secure, and back up their computer, while ensuring it works exactly how you need.

Given that understanding, which option is better: A data management system which utilizes local and/or remote servers, or a cloud-based one?

Still leaning towards the former? I get it. I’m all about maintaining control over my tech and data. However, while you know how it works and what’s needed to keep it running great, others may not. For business data, it’s all managed in the cloud, because it’s not just me.

Advantages of Cloud-Based Data Management

You may think the best people to manage your data is, well, your people. If you believed that 100%, you wouldn’t be reading this article.

Plus, cloud-based doesn’t mean you lose control. You actually get more. It adds a range of other benefits not possible with your on-site or remotely-managed systems. Businesses are migrating to cloud-based systems for a variety of reasons. Here are just a few:

Cloud-based = Connected to the Internet

Server Network Connections

For many, that brings visions of hackers, ID theft, and online crime. In reality, cloud-based systems can be more secure than your local and remote servers.

With features such as geofencing, strong encryption, user management roles, and more, you can meet legal compliance while securing your data. All while making sure it’s easy to access.

All service providers in our industry have great security track records.

Cost Considerations

Can you really put a price on data? Yes, actually you can. At its most basic, cloud-based systems are often less costly than traditional “fixed” platforms. We won’t even get into the cost savings from easy access and reduced labor. Instead:

  • No hardware expenses: With dedicated, you need to buy and maintain the hardware. Then you have to consider the specialized physical space necessary to keep your server running happy, not to mention redundancy and security.
  • Staff: Your on-site or remote systems don’t run themselves. They need a team of employees to configure, maintain, and troubleshoot them 24/7. Expertise like that isn’t cheap. Cloud-based systems include their costs.
  • Efficiency: A physical server, whether on-site or remotely accessible, is a fixed amount of resources. You may not need everything it can offer, but you pay for it all. Cloud-based systems typically charge you only for the resources you use.
  • Scalability: Is your institution growing? Great news! Your on-site system may need literal hardware additions (along with the necessary maintenance) to keep up. Both take time and money, diverting your attention from your account holders.
    • Cloud-based platforms are scalable. That means they grow with you and can instantly meet your current needs. “Spinning up” more resources is simple. Some services even offer discounts on services as you grow.

Speed & Performance

Fiber Optic Lit End Spread Out
Fiber optics are fast.

Getting at your data needs to be fast and easy. If we learned one thing from the pandemic, it’s that work needs to be possible from anywhere. Being online, cloud-based platforms are accessible from home or the office.

Your staff can use the device of their choice (which they’ll enjoy) while preserving your IT’s security requirements. Plus, cloud-based systems can deliver high speed and database performance, driving more productivity.

And from a personal, yet likely relatable, perspective: When tech just works and does so fast, from the devices you’re most comfortable using, it’s a lot easier to get stuff done. 

Create a “Single Source of Truth”

Computer with Different Charts

Silos are perfect for storing corn, wheat, and grain. Not data. Modern institutions looking to operate at their fullest need data available in a centralized point. That way, every stakeholder can access it just as easily.

When all your data is in that one place, it becomes a “single source of truth”. This is better than a countryside of opaque silos.

The point of using a data management company is to create this reality. There’s more than one way to get there. Data management companies offer two slightly different methodologies. Since you’re going to hear these terms, let’s make sure you are familiar with both:

Data Warehouse

A data warehouse is the “older” way of managing your data. Think of it as a place to hold specific semi-cleaned data. Your organization generates a lot of data, all the time. Right now, most of it is “dirty” and not cross-compatible without editing.

That’s where data management companies can help. They work with you to build a process that cleans the data as it arrives, putting it into a usable format.

Sounds great…is there a downside?

The design of data warehouses means only small subsets of data are made available. This isn’t a home for all of your historical information. That can become an issue when you need to look back years or from specific departments.

And, though the data is clean, it may not be usable for institution-wide analysis.

So if data warehouse strategies don’t get your cake and a fork to eat it with, why go through the trouble? Great question. Data warehouses are easier to create than the second approach, which we discuss below.

It’s our opinion that putting in the “painful” work to get all your data usable across your entire organization is worth the trouble. You wouldn’t go 50% in on making a great new product for your account holders, right?

Data Lake 

Buoy Against Sunset
Data collection…in a body of water. How am I not doing stand-up?

Data lake is the new terminology and approach for data management companies. Whereas the warehouse let you store some of your data, a lake lets you toss it all in. Really, jump in…the water’s nice!

For data lake creation, you’ll work with a data management company to migrate everything you have, including raw information.

All silos are eliminated. All data is cleaned. Categories are unified.

Access is set up on a permissions basis into the one system (or lake).

In addition, you can also execute machine learning processes within this data lake, or create custom dashboards that suit the goals of various departments. It’s more than just where your data resides. It’s how you learn from it.

Imagine a lake stocked with trout. Anytime you drop in a line, tug, you get a perfect catch! Except the trout are your data. And the fishing rod is your device. It makes total sense.

The Why: Benefits to your Institution

We’ve come a long way. Let’s take a moment to review what we learned so far.

  • The two main issues keeping you from doing more with your data:
    • Dirty data
    • Silos
  • What “cloud-based” means and its advantages:
    • Online system
    • Easily accessible for those with access
    • Flexible growth
    • Secure
    • Cost-effective
  • How data management companies manage your information:
    • Data warehouses
    • Data lakes

That’s a lot! Nice work on building your knowledge! Now, let’s look at how a modern data management system can positively affect your institution.

Make Confident Decisions

Laptop with Book Inside
Data and wisdom. At least, that’s what I get from it.

Planning and strategy work better with good information. Be confident with the decisions you make by relying on current and accurate data. There’s no need to have outdated reports anymore!

With centralized data, it is current to the second and displayed through customized reports and dashboards. Share your data how you want to answer the questions you have.

In fact, a great data management service will work with you to build dashboards based on your needs and goals.

Enable Self-Service Data Access for All Employees

With access controls and user-based permissions, you can allow every employee access to the data they need, when they need it. Say goodbye to those special requests to IT or management. And employees can even get their own custom dashboards.

This doesn’t just improve productivity. It makes your staff feel more included in your institution. Because they are!

Analyze Historical Data for Predictive Analysis

Computer with Different Charts

Big Data only works when the data is complete, accurate, and accessible. A data management service helps you achieve all three! That “single source of truth” empowers your team to get a deeper understanding of “where you’ve been” and use that to plan for the future.

In addition, if your team includes data scientists or machine learning experts, this is the setup they want. Your system will allow them to perform their analysis right on the dataset. Imagine getting real-time predictive reporting with no additional user input.

Automate Routine Daily & Monthly Reports

Computer with Data Dashboard

Furthering the idea of “hands-free”, let’s talk boring reports. You know, the KPIs and such. Besides being able to create more helpful reports, your system can also do them automatically. How many reports do you run manually each day, week, and month?

That’s time-consuming and can lead to inconsistencies, from font size to what data was included. Work better with consistent reports. Set your data management system to “auto” output and let your staff make better use of their time.

Your reports post on the schedule you choose. Day in, day out.

Drive Revenue Growth

How can having deeper insights on your entire institution help your marketing? With data driving your decisions, you can engage in precision marketing that drives your revenue needle.

How much of your staff’s day involves doing repetitive tasks and not directly serving your account holders? Automation let’s them get back to what builds loyalty, makes money, and, let’s face it, they really enjoy.

How much revenue did each product and service bring in over the past quarter? What about compared to the previous 3 quarters? Increase margins by getting advanced profit analysis across your entire suite of products.

Data That Drives a Great Big Beautiful Tomorrow

Think about how many times your CEO has said, “I have too much actionable data guidance.” With a data management system, it could become their favorite phrase!

Who wouldn’t want all their data at their fingertips, from wherever they are, on whatever device, to learn whatever they want from it? I’ve written about the power of having great and accessible data. Unlock your potential by tapping into it.

Like your (soon-to-be-gone, right?) data silos, this is only a piece of the picture. We’ll help you decide the best approach for data management, plus share some of the best providers in our industry. And more!

Stay in the loop and help us improve our own data by Subscribing to the Learning Library today!

Joe Winn - CU Geek

Blogger. Speaker. Futurist. Part-time Jedi.

Dedicated to helping your credit union, large or small, deliver mission-focused financial empowerment to your members. And make a positive impact on your community while you’re at it.