The banks must take control of their dangerous data silos

Remaining compliant in today’s financial industries requires a comprehensive monitoring function. Every call, message and communication between employees, customers and trading partners must be captured, stored and monitored to demonstrate compliance.

As regulatory requirements have become more demanding, many banks have tried to plug gaps in coverage by adding new point solutions to their older technology. Each time a regulator makes a new request, more software has been assembled into an ever-larger patchwork of systems.

The result? With each additional solution comes a data silo – a collection of information that is not fully or easily accessible to the bank because it is recorded or stored differently from everything else. A typical tier-one bank now runs countless voice recording, trade monitoring and data archiving systems.

Each will format and timestamp data differently, while also referencing individual employees under surveillance in ways inconsistent with other systems. In short, it’s a disparate mess, both in terms of technology investment and the human resources required to filter through all the information.

Prohibitive export costs

Promisingly, banks are rightly trying to clean things up by taking on the long-standing task of reducing the number of data silos they work with. But this is not without its own challenges. The largest is the web of contracts that often accompany the introduction of new surveillance technology.

The terms of many current framework agreements between banks and their archiving and monitoring providers stipulate that data can only be extracted before the end of the contract if the banks pay a fee that can run into the hundreds of thousands of pounds for order management systems, and even higher. for computer-intensive voice recorders.

If a bank has to run a discovery process, the cost of exporting the data can be ridiculous – not to mention hugely time-consuming. Even after this cost, it could take months for a bank to access the data, which would still be in a proprietary format. Changing the way the systems record or format data may incur an additional cost.

Therefore, when contracts are terminated, banks should consider negotiating hard for new terms that allow them to change the way data is formatted or pull information out of applications—either continuously or as needed—so that a second, bank-owned copy can be created and maintained. Or a “golden spring”, as it is sometimes referred to.

Data in this copy can then be normalized and merged with other normalized data sets, so that everyone in the bank with analysis tools – both within compliance and beyond – can query them as one.

Even if a bank makes the strategic decision to maintain some silos, there are two considerations that need to be made. Firstly, it is important that the bank is able to extract data at any time, which must be reflected in a contract. Secondly, the bank must take stock of all the costs associated with each data silo so that they can plan for the future.

Tip the balance of power

This approach helps shift the power dynamic between banks and their technology providers back in the banks’ favor. This is because the bank will be able to run all its reporting and analysis from its own comprehensive copy of the data. With this in mind, the bank is free to switch technology providers so that it can avoid being tied to silos and the costs associated with them.

Once the banks have created a comprehensive data warehouse that they own – albeit in copy form – they can also make it immutable, which means that nothing can be changed without leaving a clear audit trail. This can be achieved using blockchain technology, where records are distributed and therefore cannot be hacked.

Furthermore, the cost implications of maintaining copies tend not to be as heavy as assumed, at least for less data-intensive applications. While the data associated with voice and e-communications monitoring systems can be vast, having two copies of an order management system or metadata associated with every other activity a bank does, no matter how large the operations, is not much information. In fact, the actual storage of a data silo is relatively cheap due to cheap disk space.

Whatever approach banks take to solving the data silo challenge – whether fast-tracking the breakdown of silos or opting for a more gradual reduction while negotiating better access to data – creating a “golden source” is an important first step.

When the banks have control over all important metadata related to silos, they can build a fully integrated solution that provides an interpretation of regulations, the necessary guidelines related to the roles of individuals and the organisation’s attitude to its social responsibility.

Only by doing so will banks have begun to address this problem, while still remaining compliant and reducing overall costs. Now is the time to act and start tackling the patchwork of systems that at worst can lead to problems with regulators, and at best can cost a fortune to untangle.

About the Author: Rob Houghton is the founder and CTO of Insightful Technology, a company that develops disruptive SaaS technology to dramatically reduce the costs, risks and complexity associated with regulatory compliance.