Digital transformation in BFSI: 5 trends with data virtualization

Digital transformation is a business priority for organizations across industries. Evolving customer expectations, fierce competition, an increasing need to streamline operations and more factors are driving the quest for innovation and reinvention.

For banks and financial service organizations, digital transformation isn’t an option; it is essential. Consumers have increasingly switched to the convenience of online and mobile banking. The global pandemic has only underlined the importance of digital solutions as contactless payments, mobile commerce and more have become an essential part of a touchless customer experience in the age of social distancing.

According to BDO’s 2020 Financial Services Digital Transformation survey, 100 percent of middle-market organizations across asset management, financial institutions and insurance industries have already either developed a digital strategy or are planning to develop one. However, only 27 percent are executing on a digital strategy.

While some organizations are readily capable of embracing digital transformation, the journey might be challenging, even daunting, for others. For most, it is important to shift their thinking, upskill employees and update organization culture to become a digital business.

For most BFSI companies, data virtualization facilitates digital transformation with the help of advanced data integration and data delivery methods that enable more agility, more flexibility and higher efficiency.

Data virtualization plays a key role in accelerating business value. It helps integrate data from multiple sources without moving or having to copy it, while providing a single virtual layer to access all necessary data.

In this article, we enlist the digital transformation trends in the BFSI industry with data virtualization.

Cloud computing

With most financial service companies now employing multiple cloud services, data virtualization is proving critical in integrating all the data from the different services from cloud providers.

Cloud computing offers myriad benefits that are widely acknowledged. However, the journey to reaping those benefits may be challenging.

Maintaining hybrid cloud infrastructures can be complex. The reason being organizations may need to combine multiple data sources in different formats and protocols from various cloud services. The sources may also include legacy on-prem and SaaS, the acronym for software as a service, applications.

To help address the challenges, data virtualization is kept in the architecture atop the different data sources. This provides a single layer that removes the complexity for users while exposing and integrating all the data with the help of a secure, unified data fabric layer.

Data is not moved or stored repeatedly, which means the IT department can proceed with cloud migrations and changes to the application without disrupting business users.

Digital payments

The use of contactless cards has grown rapidly in recent years and the possibility of a cashless society, where financial transactions will not be conducted with money in the form of physical coins and banknotes, cannot be ruled out.

One American multinational financial services corporation has documented that 31 million Americans tapped their contactless card or a digital wallet in March 2020; it was 25 million more in number compared to in November the previous year.

Equally, the percentage of people paying with cash is reducing drastically too. The numbers offer an insight into the payment patterns.

Reducing fraud is one of the salient features of contactless or digital payments, which also provide banks and financial organizations with new upsell opportunities.

Agile development is the need of the hour to take advantage of such shifts in customer behavior and data integration is again important to bring it to fruition.

Data virtualization is being leveraged to accelerate analytics outcomes with users reportedly saving 80-90 percent of traditional development and deployment times, which translates to competitive advantage.

Enhancing customer experience

The global pandemic has indeed accelerated the need for digital transformation for financial institutions, with consumers themselves more demanding.

Chatbots and virtual assistant are being widely deployed, while analytics and artificial intelligence (AI) are helping generate insights and facilitating personalized banking, which are in turn improving customer experience.

For banks and financial companies, the additional data presents more opportunities for upselling existing products, propensity modelling, reducing fraud, and to gain a clear understanding of new, better offerings.

For digitization and analytics to be effective to enhance customer experience, data integration is essential. Data virtualization is helping accelerate those capabilities by being a single point of access to all data, irrespective of location and source.

Open banking

A couple of key challenges must be addressed in open banking.

One key question is how much data you can expose and how it can be achieved. Data integration is the other challenge with open banking depending on the consolidation of data from multiple, siloed data sources.

Data virtualization’s unified data layer enables any data source or application to be combined in the virtual layer and exposed to any number of consumers of data.

The virtual layer in the data virtualization platform also provides centralized security, governance, and early exposure via APIs, in addition to accelerating data integration.

In contrast to traditional data integration methods that depend on batch movement and typically copying high volumes of data, data virtualization enables real-time access to data.

Online and mobile banking

According to a Statista report from November 2020, adoption of online banking increased from 55 percent to 76 percent in the last five years. And of course, the trend is only set to continue its upward trajectory.

Exposure of internet banking services and exposure of applications on mobile devices require backend data integration from multiple disparate systems. A lot of those systems were built without taking into account the new data integration requirements.

Leveraging data virtualization as a common layer to expose all sources helps a data model to be developed once before exposing it to consumers of multiple channels. It helps accelerate development and add new services, products and functions.

Summary

Digital transformation helps unlock key capabilities to respond faster to customer needs, improve personalization and thereby enrich customer experiences. With the help of data virtualization, financial organizations reduce time-to-market and achieve greater agility to meet evolving market dynamics.