Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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The inventor Charles Kettering once said: ‘If you have always done it that way, it is probably wrong’. The financial services industry knows this better than most; only through continuous change and innovation can firms in the sector keep up with consumer demand.

Why is this? Firstly, challenger banks have shaken up financial services. India has been front and centre of this Fintech revolution, producing the second-highest number of Fintech startups globally in the last three years – and the growth looks set to continue.

Consumer expectations have shifted, with new Fintechs offering more seamless, personalized experiences. Add a global pandemic into the mix, and consumer demands have shifted again, with customers wanting more and more services online. Younger generations in particular are voting with their feet, with only 25% of US Gen Z customers using an account from a major traditional bank.

However, traditional finance need not despair. Traditional banks have the experience, know-how and a wealth of data to pose a significant advantage. With the right skills and infrastructure, they can begin to move away from a legacy mindset and become continuous innovators.

1) Data in motion is transformative

Traditional banks are unrivaled in their data to inform digital transformation, with an abundance of primary and secondary data.

But the sheer volume of data is a double-edged sword – it can overwhelm and trigger inaction. Seeing the forest for the trees and charting a course of action is a challenge in itself.

That’s why the world’s largest companies employ hundreds of data engineers and scientists to track inconsistencies and detect fraud. However, decrypting data efficiently takes a data infrastructure that’s set up to support the business in real time.

Why is this so crucial? Around 78% of bankers expect fraud cases to increase in the next few years in India because of pandemic disruption. There is nothing more damaging to consumer trust than fraud.

Now that they have such a wide choice, customers can easily move onto the next bank if they’re not satisfied with its security.

By setting data in motion, you bring together all databases and tools into a single system, so that you have constant access to the data you store in real time. This means that banks can get better at preventing and detecting fraud, as they have oversight of transactions in real time.

Having control of your data makes costly inconsistencies less likely and means you can constantly tweak and enhance products.

2) It pays to put people first

We’re seeing more and more that companies are becoming software companies by proxy as they bring to the fore the digital aspects of their products to meet customer needs.

The problem is that this takes digital skills – gold dust that is in short supply.

The digital skills gap is causing major challenges when it comes to data innovation. There’s huge competition for talent, with a YouGov report commissioned by Salesforce predicting that demand for digital skills in India will grow 20x by 2024.

Meanwhile, 87% of companies globally have digital skill gaps, according to McKinsey. As businesses in India embark on digital transformation, there will be stiff competition for this talent pool.

Wisely, companies often focus on upskilling their internal teams for data tasks. While this is crucial longer-term, it can take up to a year in training, not to mention conflicts with other responsibilities. The pause on innovation, while employees are trained up, is a delay that most cannot afford in the ever-innovating financial services landscape.

Finding the right partner helps companies transition smoothly. Data partners can provide the expertise needed to harness your data, even in the most stagnant labour markets. They will often train internal teams so that you create a data strategy that’s sustainable in the long term.

3) Secure buy-in and correct misconceptions about data in motion

All forms of innovation meet with resistance. Making a convincing argument that data in motion is the way forwards can be challenging.

At Confluent, this comes second only to the skills gap in terms of the difficulties customers have when making data in motion their new data architecture.

We’ve heard stakeholders express uncertainty about the potential costs, the maturity and security of data in motion, in addition to worries about internal skill requirements.

In reality, the benefits of data in motion are proven, and it pays for itself almost instantly. The insights generated drive improvements to customer experience. This means you’re more likely to retain customers and interest new ones in the future.

In my view, there are two types of leaders. The first group are excited by innovation – they are natural problem-solvers who are always looking for solutions to the obstacles their teams are facing. They prioritize data to create memorable, tailored experiences for customers and to be responsive in real time.

The second group are more hesitant. They are loath to part with legacy systems, feeling that the proponents of automation and data in motion must be making false promises. Many incorrectly cast digital native companies as unruly risk-takers, even as they watch them pinch customers.

It’s really a question of mindset. The only way to convince them is to show them data in motion – in action.

How Bank Rakyat Indonesia uses Confluent to boost its microfinance services 

Bank Rakyat Indonesia (BRI) is a case study that will persuade even the most ardent data in motion sceptics. Founded in 1895, BRI is one of the oldest and largest banks in Indonesia. It’s also the largest microfinance institution in the world. They wanted to modernize their microfinance business – but delivering digitisation in such a complex organization is no mean feat.

Through Confluent and Apache Kafka, BRI created an event-driven architecture to drive real-time data. They’ve used this for credit scoring, fraud detection and merchant assessment services. One of the most exciting innovations was a system to detect anomalous customer transactions in real time, and a microlending app named Pinang, that boosted financial inclusion and reached new market segments.

This cutting-edge technology is transforming the experience of their microfinance customers.

Harness your data to keep pace with innovation

Innovation is crucial to financial services. It keeps us growing, it creates relevant products for customers, and it allows us to automate so that the people of this industry can put their skills to good use.

Access to data services talent is few and far between. But that doesn’t mean that transitioning to a digital-first strategy is out of reach. Data in motion infrastructure provides the blueprint for organizations to leverage their data, make informed, evidence-based decisions and boost customer experiences.

Confluent offers the platform that allows financial services firms of all stripes to be formidable contenders in the digital world.

Written by

Srinivasulu Grandhi, VP of Engineering and Site Leader, Confluent

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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