Your financial institution has more data on your account holders than Amazon does on their customers. How are you taking advantage of that superpower?
If you’re like most institutions, you have a kryptonite standing in the way. Your data is not in a form you can use to create x-ray vision or super speed or…no, wait, that’s something else.
You have data. Unfortunately, it’s most likely not optimized to provide insights. That comes from setting up a data management regime and process. What’s that and how can you implement it? We’ve got a data management service primer. Start there.
Now we will talk about data management services and ensure your understanding is strong as a certain superhero’s bulletproof skin. Let’s fly into this discussion of data management service pros and cons. And leave the superhero puns here in the intro.
Data everywhere! Now what?
Every minute of every day, your institution is gathering data. It’s gold, but also unrefined. Unsifted, if you will. When panning, you filter out the dirt to get to the precious metal. It’s the same for your data; trust and sorting help you get the value from this flowing stream.
If you’re looking for gold, you need the right tools. So where’s the outfitters exchange for financial institution data? Right here.
It all starts with a data management system. You may choose to go it alone and build in-house, or you can work with a specialized partner. Both directions lead to the same result. However, we want to help ensure your road is as smooth and direct as possible.
Full disclosure: Our professional opinion is that working with a trusted data management service is your best strategy. Remember, the goal is to create actionable insights; the system is your how.
Of course, you may wonder why you need any of this. Your institution runs just fine today, and you’ve always done it this way. The financials are healthy, so why change anything?
Remember that the rate of change of change (not a typo) happens exponentially, so you won’t notice the direct impacts until it’s way too late.
Our first article explained what a data management system (and service) is. We also helped you understand how having one can help your financial institution. This article will dive into the pros and cons of various approaches (and inaction).
By the end, you’ll be able to say with certainty if a data management system makes sense for your financial institution, and also whether you feel it’s best to go it alone or find a strategic partner.
Your Learning Journey
“Unknown unknowns.” These are the hardest problems to address. How can you solve a challenge you don’t even know exists? By its very nature, you wouldn’t be looking for solutions…because you’re not aware of an issue.
Data management is almost always this kind of problem.
Let’s say you’re an insightful person. I mean, you are reading on the Learning Library, so that makes you top-notch already. Given this zeal for knowledge, you’ve been staying current on important topics through online research.
From industry publications to sites like this one, you’ve managed to identify a possible issue. Your unknown unknown is now a “maybe-kinda known unknown”. That’s progress! Where to next? We always support reaching out to peers.
The credit union world, especially, is full of strong believers in people helping people. That could help, but everyone’s situation is different, and one institution may have challenges yours already overcame or never faced.
Now that you’re suspicious there could be a problem lurking at your institution, it may seem time to reach out to vendors. Sure, some offer quality information, but the vast majority have a built-in bias. Naturally, they are trying to sell their services.
If you’re looking to get the highs and lows, the goods and the bads, the pros and the cons, you are already in the perfect place…the GreenProfit Learning Library. There are also other consulting firms such as CUlytics or Engage FI.
Yeah, we’re even linking to our “competition” in sharing insights! We are either crazy or reincarnated versions of the Miracle on 34th Street Macy’s Santa.
So we’re talking data management challenges, the pros and cons. We’re going to start with the Cons, because it’s better to get them out of the way. Then, we can better understand the Pros for your staff, institution, and account holders.
At the end, we’ll tidy it up in a nice summary so you can decide if pursuing a data management system (or service) makes sense at your institution. Then we’ll help you connect to the best resources to start the process. Sound golden?
We’ll be referring to data management systems and data management services. The former is a platform, built and handled in-house or by a partner. A service is always vendor-managed. You can have a system powered by a service or just a standalone system.
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The Cons of a Data Management System
No changes happen in a vacuum. Everything has a cost, whether in time, actual money, expertise, or physical stuff. At this point, you may not be convinced any of this is even necessary, so let’s get the “costs” out of the way now.
Bottom line: There’s no free lunch.
Remember to check out the What is a Data Management Service article for a refresher on why we believe it is important. Much of this information depends on your institution choosing a “go it alone” approach, as any partner will use a service that eliminates most of these Cons.
Hardware
Your data takes up a lot of space, and that amount is only going up. Historically, this meant large expenditures in physical hardware. Then you had to ensure a safe and secure location for that equipment. Some institutions still use this approach today.
All your data is on an expensive server, perhaps even in a special room at your headquarters. To ensure better management, you may need to update or add to what you have. The mere suggestion of messing with it might be enough for you to discount the rest of this article.
Fortunately, this isn’t necessary anymore, with the low cost of cloud storage and processing. To be clear, the “cloud” just means, “someone else’s computer”. In this case, it’s one which is maintained to do just what you need.
While you may still choose to purchase and use your own dedicated data storage and processing hardware, it makes more sense to use the cloud. And that’s from cost, security, stability, and accessibility perspectives. We’ll look into that later on.
Bottom line: Doing it yourself means paying for hardware and all the costs that come with keeping it happy and operating smoothly. Not to mention needed physical upgrades over time. Cloud-based makes those costs consistent and eliminates unexpected spending.
Software
This is the brains of your entire system. Right now, it could include your core, or possibly an interface platform installed to communicate with your main data pool (which may include your LOS).
None are cheap. Plus, of course, it means a full due diligence process ensuring the software meets your security standards. Then, you have to verify it works with your existing systems both in theory and practice (trust me, those can vary).
We also need to include the time required from your IT team to install it across your network. I’m sure they have nothing on their plate now.
Then, it will have to be integrated into your existing data flow. Without changing your processes, it might just be a “pretty face” to the same functionality you have today. And with the migration to software as a service, it may even be an annual subscription.
So you’re paying on an ongoing basis, just as you would with a service partner, but without getting the partner.
Bottom line: Buying software without a team to help integrate it into your institution means you pay in time and effort.
Staff and Skill Set
Do you have data management experts on staff today? Typically, these include database administrators, application programmers, database designers, systems analysts, hardware maintenance personnel, and data scientists. Sorry, your IT person cannot also take this on.
Your institution will need to evaluate the HR costs of having these individuals on staff if you are considering your own proprietary system.
Bottom line: Specialized staff costs money, and if you already have experts on these topics, data management needs will occupy them and keep from coming up with new ways to use the information.
Data Conversion
Your data is a mess. I don’t say that as an insult. Everyone has messy data. You’re not alone by any means. Unfortunately, cleaning it up isn’t just a matter of turning on the Roomba. Plan on this to be the most complex and costly part of a data management system.
It’s not your fault; every new system incorporates a slightly different way of inputting data. While you work hard to keep everything talking, little glitches will emerge, often without anyone’s knowledge. What kind of things can happen? And who cares if it all still runs?
Great questions. Maybe at one time, your system had state fields using 3 letter abbreviations. Then, an update switched to full names. Now, it’s an easy and standardized two letter input. No big deal for daily usage, but when you try to glean insights, the system can’t read it all.
Who wants to volunteer to sift through the core and manually change each state field into today’s two letter format? Don’t all raise your hands at once.
That’s just a simple example. Others can be more troublesome, as explained in our first data management writeup. When your system has 57 states, it’s hard to do reliable analysis.
Data management service providers call this “dirty data”, and whether going it alone or partnering, cleaning all that up is the essential first step. Without tested processes, like trying to clean a teenager’s room while they’re inside, this can become an enormous chore.
Do you really want to dedicate your staff’s time, energy, and attention to such an effort?
Only if you want to find the gold. Even in California, some degree of digging or panning was necessary. Depending on the condition of your data, that could mean quite a bit of work.
Moving forward, you’ll need to set up a plan and process to keep new data from going in dirty. The technical terms are “data integrity” and “centralization plans”, but you can just think, “do it better so we don’t have issues again”.
Bottom line: It can seem daunting to look at your entire data pool and wonder how much manual cleaning needs to be done.
Database Failure
In web parlance, this is a 503 error. It’s…not good. While that message usually means the system is down, until it’s back, there’s always a concern for the integrity of your data.
When we say database, think “core”. If that’s offline, you’re out of business. Data isn’t just key for organization, it’s necessary to process requests, both old and new. And if it’s not only down, but corrupted, that’s really bad. Business continuity becomes a phrase tossed around.
Of course, downtime can have enormous costs, direct and indirect. As you centralize your data for easier management, it can become a single source of failure. If you have it on one institution-maintained server, and that unit fails, data loss is a possibility.
To counter this scenario, your IT and data specialists will insist on having colocation, mirrored backups, RAID drive setups, seamless failover, and lots of other jargon. For you, they all mean additional costs.
Bottom line: When your entire institution depends on a single source of data, it can’t go down. And if it does, so has your institution.
No Future Planning
If you were asked about 2020 plans in late 2019, do you think that answer would remain valid only a few months later? Planning isn’t a one-time process. It’s a living effort that needs constant refinement as circumstances evolve.
Looking at your data, what are your goals and objectives with it? Do you know how much you’ve added during the past 5 years? What volume are you creating today, and which parts are most critical to your daily needs?
These are just a few questions you and your IT team need to answer before embarking on any data management effort. And if you choose to find a strategic partner, they’ll have more to ask. That’s time-consuming and, really, how can you even answer some of them?
Sidenote: This is the greatest challenge faced by institutions working with a data management service: Knowing what their data is doing today, where it all is, and how they access it. When your room is a mess, finding those perfect pants can be a challenge.
What if you don’t plan it out ahead of time? Either way, you’ll spend time, money, and energy getting your data “organized”. But without a strategic plan, it could become outdated and need replacing in just a few years. Which defeats the purpose, don’t you think?
Bottom line: Planning is essential to the long-term success of your financial institution. Data must be treated with the same respect.
The Pros of a Data Management System (and Service)
Whew! Talk about a downer! It was important to get all the Cons out of the way, because many of them were really just Pros looked at with a “glass isn’t just half-empty, it’s smashed on the ground” perspective.
Since you’re still here, you recognize the enormous value to having organized, accessible, and actionable data at your institution. You’ll be able to create experiences never dreamed before and provide insights with depth that drive action.
Let’s look at the many upsides to implementing a Data Management System (and Service). We believe these Pros will convince you how important this endeavor is for your institution.
Nearly all of these are dependent on partnering with a vendor that specializes in data management. They’ll help you achieve each of these Pros with a minimum of effort (not none; it’s still a lot of data wrangling!).
A Single Source of Truth
Can you believe your data? Serious question. If it’s “messy” or “dirty”, the insights you glean may not be accurate. Whether you have gigabytes or terabytes of data, it’s essential to be certain it is real.
That also applies to your large Excel spreadsheets.
Sidenote: A data expert shared with me a credit union client which had their member information spread across 407 Excel spreadsheets. I’m sure they were all consistent and up-to-date.
Data management services help your institution clean and transform every piece of data to create a “single source of truth”. This trusted source is what staff and members pull from for any analysis, insights, or actions.
Everyone is using the same dataset and all share confidence that it’s accurate for all purposes. Which conveniently brings us into the next Pro of data management systems…
Dump the Silos
Your institution has them. Good for grain, bad for data, or really any operation of your institution.
Different departments and staff access and create data every day. Being human, we’re all prone to errors and inefficiencies. No doubt, some departments or individuals have fabulous data policies. Others, less so. And those systems don’t talk to each other. So no way to error-correct.
In fact, is that the same data expressed in different ways? What works for one department may not fit for another, meaning the problem just compounds itself every day. Compounded interest is cool. Compounded data inefficiency is not.
When you all access the same pool of data (it’s often referred to as a “data lake”), silos cease to exist. Good riddance!
A well-designed data management system handles the needs of all users, letting them interact in the way that works best for them. At the same time, it creates a consistent process to ensure all new data becomes part of the “single source of truth”.
Finally, you can make this clean, functional, and downright attractive data accessible to all authorized employees throughout the institution. Adios, silos!
Simple Data Manipulation
Now that your data is in one place, organized, and every connecting platform can work with it in a unified fashion…how do you edit it?
We recognize that your institution doesn’t just need to access the data; you have to change and add to it constantly! Not every staff member is a data expert. Be honest, some are afraid of Excel. (It’s ok. I know the basics and still cringe at it, too.)
Your data management service understands your staff has a range of familiarity and comfort with such systems. Assuming you work closely with a vendor specializing in this space, they’ll ensure this is not an issue. Go it alone, and this can be a major challenge.
In fact, the risk you run here is that a difficult-to-use system is ignored by your staff and they do their own thing with data inputs. Which is exactly how you got in this situation originally. Not helpful.
All paths to the data are built like an intuitive website. Simple access and modification, personalized for the needs of the user. They’ll even set up dynamic dashboards for each department so your team can see pertinent insights at a glance, anytime, anywhere.
These dashboards increase productivity and use of your data gold. Think of dashboards like windows into future jewelry stores. Now you can see all those glittering metals you just mined in their processed glory!
Backups and Disaster Prevention
It was elementary school when my first hard drive crashed on me. After losing a report, I vowed to always have backups of anything I’d be upset about losing. To this day, I maintain the same commitment towards personal and business data. How’s your backup system?
Most likely, your financial institution has processes in place to back up your critical data to an off-site location. It might be to a physical server or a cloud service. Either way, preparing for the unexpected isn’t a nicety; it’s a regulatory requirement. One that’s best handled professionally.
We still run into institutions with a mirror site, where they maintain a backed-up version of their core system. It might be a bit out of date, but usually no more than that day’s information.
The rationale is that if a hurricane hit Miami, or all the power/network connections at the data center were severed, you could roll over to your backup in Denver with minimal downtime.
Today, that concept still applies, but tends to fall to cloud servers. Using “someone else’s computer” means having a global network of redundancy across dozens, perhaps hundreds, of physical and virtual storage systems.
With automatic distribution across a storage grid, that hurricane in Miami or snowstorm in Denver would have no impact on your institution’s ability to access its data.
Your data management service partner will help you build a seamless backup and operational continuity strategy.
Data Management Service Vendors Have Skills
Do you look at this whole data management thing and think, “that would be great, but we really aren’t equipped to build, manage, and then figure out how to use some new system”?
You’re not alone. Did you build your own LOS or core? (Sure, sometimes you’ll wish you did to get the functionality expected, but that’s a different article.) Data management services are ready to help.
Most data management vendors provide customized platforms where your institution operates as an “end user”. Thus, no need for dedicated staff; that’s why you’re paying for their service. As a licensee, your institution has access to their team of pros when needed.
They’ll consult with your teams to build the right system for every department. Then, each will receive training so they can get the most out of it (while ensuring any new data goes in cleanly).
Like other relationships, finding the right partner to match your needs is critical. If only someone put the best data management providers in one place…
Stay Flexible
Technology moves fast. Planning does not. Equipped with a data management service, you can remain dynamic, pivoting quickly based on current needs. Imagine if, say, there was a global pandemic and all interactions shifted to digital platforms. Wild, right?
There could be other challenges, but accessing and acting on your data wouldn’t be one of them.
Progress With Better Data
In only a few years, data management systems have come a long way. With highly-qualified service providers behind them, your institution can relinquish the heavy lifting in development and maintenance. As a result of building systems for many institutions, costs are down also.
Many of the Cons you read above reflect how the industry used to be.
Not any more.
It’s your prerogative to build a proprietary system, embracing internal talent to put it all together, then make sure it continues to work for your institution moving forward. All it would take is:
- Develop processes
- Solve for discovered challenges
- Collate all data, including what’s created real-time
- Code a software platform to fit your needs
- Provide continuous updates for feature improvements, compatibility, and security
- Set up a backup regime
- Troubleshoot issues as they arise
- Offer ongoing staff training
- Purchase needed hardware and surrounding environment to keep it running
Simple, right? Or, you could partner with a qualified vendor that will develop a solution that fits your needs. According to our friends at Arkatecture, some institutions are enjoying their new data experience in a matter of months. No server rooms needed.
From their IT skills and software platforms, to APIs connecting to your existing data, we believe it makes financial sense to start your data journey with a great partner.
Continue Your Data Journey
While an extensive read, this isn’t our only resource on Data Management Systems (and Services). Be sure to get the why in our introduction to data management services. Then, find the right partner with our 5 Best Data Management System Vendors for Financial Institutions.
Finally, be sure to Subscribe to the Learning Library to get insights like these to fit your position. With special email digests and first-look access to our latest research materials, it’s one subscription you don’t want to skip!
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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.