Redefining the relationship with data, FinTech industry veteran and Managing Director of Provenir,
Paul Thomas has witnessed the data struggle firsthand in his work with both
Thomas has a unique, perhaps even renegade, approach to solving data challenges. He believes that organizations need to reimagine their relationship with data and restructure their infrastructure to take advantage of new data sources and
In a fast-paced and far-reaching interview peppered with many industry examples and anecdotes, Thomas explains why—and most importantly, how—financial services providers can transform how they use data to deliver the products and services consumers want.
The data is there. What’s the problem?
Financial services firms may have tons of data but they can’t access, aggregate, normalize, and integrate multiple data sets. Even the smartest data scientists can’t find the data that’s buried in data warehouses. Or they don’t have the authorization rights to access the data. Or they simply aren’t experts in business processes such as financial services lending. A business could have an incredibly talented team who are highly trained in cutting edge analytical techniques, but still not have created a strong relationship with data. Their team is still disconnected from not just the data but also what that data is telling them, especially if they lack a contextual understanding of its use.
This isn’t a problem limited to large financial institutions either, data scientists working at an innovative fintech told me that they have several hundred risk models ready but can’t test them with real data and can’t deploy them into the business. It’s quite staggering, really.
Another issue is that new data sources are constantly emerging, which means businesses are always having to work out what that data can tell them, how it fits into their decisioning, and then how to develop the connection to bring that data into their processes.
One of our clients, burdened with a legacy infrastructure, is trying to integrate 13 different data sets into their legacy systems. And once they do finally complete the programming to integrate these data sets, new data sets will emerge. The CTO told me that they need to integrate at least one new data source every six months. It’s an incredibly complicated landscape even for emerging fintech businesses.
Can you give an example of how firms struggle?
We’ve already touched on the ways businesses struggle with accessing and using data, but I think it’s just as, if not more important to look at the bigger picture—especially the struggles businesses face because of their poor relationship with data. On the surface, some issues don’t appear to be data related, for example the inability to provide instant online loan approvals.
Many financial institutions can’t decision loan applications instantly, and it would be easy to think it’s because they lack the technology to do it. In reality, they can’t decision that loan instantly or within a few minutes because the loan system, or the decisioning engine behind that system, doesn’t have access to the right data or the business doesn’t have a deep enough relationship with the data to make a decision that quickly.
And loan applications aren’t the only user experience that is negatively impacted by a business having a strained or limited relationship with data. Another big issue is consumer abandonment due to poor user experience—it’s the ugliest form of abandonment. Imagine a consumer standing on a street corner and trying to make a purchase on their mobile device and the merchant asks the consumer to type in their credit card number. The consumer feels it’s a hassle to try to take their credit card out of their wallet so they give up and abandon the purchase.
One of our clients Klarna, a payments provider, is disrupting industry giant PayPal with a buy now/pay later model that addresses cart abandonment. Consumers enter their email and zip code and the firm uses incredibly sophisticated data sets to make a credit and fraud decision in about 300 milliseconds. The provider gives the merchant the go-ahead to release the goods and collects the money from the customer later. The provider firm essentially assumes the risk and helps the merchant lose less customers.
The data sets include address validation, geolocation services, and possibly credit report data. The firm aggregates that external data in near real-time with their own proprietary data set of previous consumer transactions from the firm’s growing list of merchants. It’s a brilliant model.
You’re working with firms to solve data challenges. Tell us a success story.
One customer, a large global bank client, recently completed the first phase of an initiative to integrate and normalize data from their global bureaus, calculate attributes and variables from that data, and integrate new non-bureau data sources into their decisioning engines.
This is very much them understanding that data integration has been a problem with their legacy systems and realizing that solving this problem is an essential step in their digital agenda. Allowing their team to proactively identify a solution to that problem—which in this case is using Provenir’s technology—has prepared the business to easily adapt to future data needs.
It’s refreshing—and exciting—to see traditional financial institutions embracing intelligent, modern, flexible technology.
How is the vendor and competitive landscape changing?
Acquisitions and organic growth are shaking up the vendor landscape. There’s lots of new entrants as well, but it’s still difficult for startup, core banking platforms to unseat traditional core providers that have a massive footprint across thousands of financial institutions. However, we do see some interesting startup web-based platforms that are attempting to break into the market and it’s a huge opportunity if they can make it work.
Regulations are also changing how financial institutions and technology providers interact. As governments work to make lending more transparent with regulations such as the PSD2 open banking mandate in the EU, they are opening financial institutions up to attack by non-regulated fintech firms. Regulations, as well as changing consumer attitudes, have led to a phenomenally competitive environment. Financial services firms are looking to data and sophisticated analytics to be competitive.
That said, we do see traditional financial institutions almost turning their backs on technology providers that offer monolithic, end-to-end solutions. These types of technology services offer some customization but provide very limited opportunities for competitive differentiation.
I think one area that is really interesting is seeing large financial institutions looking to fintech partners to gain access to and understand the vast amount of data that’s available. It’s fantastic to see some very exciting banks creating new architectures where they can leverage new data sources and new
A great example of this is BBVA, their leadership team talks openly about the bank’s digital agenda and how they must provide extraordinary technology solutions to
They also recognize that competition doesn’t just come from fintech firms but from tier two banks that are nimbler than they are. Their strategy includes both partnering with and
What advice would you give to financial services firms?
As obvious as this may seem I still think it’s important to say: Whatever you do, make sure it’s secure. We’ve all seen the challenges faced by credit bureaus in the past year or two and there’s a significant amount of other data breach stories in the industry. Data access, and the security of data access needs to be top of mind not just for financial institutions but for the technology partners they work with too.
The second piece of advice is be agnostic—build an architecture that’s agnostic. Financial services organizations should remember two things when it comes to data: Know that you’re going to need to access new data sources and new solutions on a regular basis, and know that you’re going to need to change the format of your existing interface to current services on a regular basis.
Plan for the solution you’ll need five to ten years from now. You absolutely need to make sure that you’re building an architecture that gives you the flexibility and scalability to integrate to sources and solutions that might not even exist yet.
Finally, partner with fintechs rather than compete against them. One of our customers in the U.K., an online small business lender that matches businesses with investors, receives referrals from U.K. banks that aren’t able to deliver funding to these businesses.
There’s an entire ecosystem of collaboration that is still being formed and we don’t know exactly what it will look like, but we do know that the driver behind the ecosystem will be the race to deliver the best products and services however consumers want to receive them.
Provenir makes risk analytics and credit decisioning faster and simpler for financial institutions. To learn more, visit
