By Gary Allemann, MD at Master Data Management

Historically, smaller African banks have been less impacted by global regulations for anti-money laundering and managing systemic risk. However, the last few years have seen both consolidation in the market, with larger more globally focussed financial services businesses emerging in a number of countries that offer real competition to European and South African institutions. 

As a result, these newer players must invest in data management tools and solutions to meet global standards, and there is significant opportunity to learn from the journey of South African banks. Rather than focusing solely on compliance, financial organisations can take a more holistic view of the opportunities created by data to drive both compliance and improved business performance.  

More than just compliance

While regulatory compliance is becoming increasingly important for larger financial services businesses across Africa, and data management is critical in enabling this, data management can deliver on so much more than just regulatory requirements. Data integrity is a powerful capability that directly increases the value of data. From improving customer satisfaction to increasing business agility to reducing risk and increasing revenue – a recent IDC Spotlight report shows that companies that invest in data integrity see positive returns across a range of business metrics. Conversely, a lack of investment in data integrity has a direct negative impact on costs and revenue. 

However, this requires banks to approach the problem from a different perspective. Rather than taking data management from a purely risk perspective, if other offensive business needs for data can be understood at the same time, then much more value can be driven from investment. 

The foundations deployed for risk management can provide a superior understanding of the data landscape that can be leveraged to deliver advanced analytics and other data products to supercharge the business. 

The open banking challenge in Africa

Effective data management becomes increasingly important as financial institutions in Africa move toward open banking. While sharing financial data with other providers to enhance products and services can boost the financial sector, pave the way for fintechs and other non-bank players, and promote innovation, competition and financial inclusion, the underlying quality of the data is critical. Any errors or inaccuracies in the data can compromise the security and privacy of customers' financial information.

The Central Bank of Nigeria, for example, has recently issued guidelines for the implementation of open banking in the country. Part of these requirements include the need to establish secure and reliable systems for customer authentication and consent management, to ensure that customers have control over who can access their data and how it is used. The guidelines also specify the need for data governance and data privacy, particularly in relation to compliance with the Nigerian Data Protection Regulation (NDPR).

While these requirements may seem onerous for participating banks, this can also be seen as an opportunity to invest in data as an asset and open the door to possibilities such as advanced analytics and machine learning, improved customer understanding, and new digital banking products and revenue streams.

How data lineage improves agility

Data lineage is a powerful tool to help with managing risk, but can also improve business agility, as the Capitec case study shows. As South Africa’s largest digital bank. Capitec needed visibility into their data for compliance purposes, but through the implementation of a data lineage tool, the bank has also seen a number of business benefits. 

By understanding the impact of data changes on both upstream and downstream dependencies and being able to understand where these changes could result in data quality issues and inaccurate reporting, Capitec is now able to effectively understand and manage the risks of data changes. 

In addition, they have a complete overview of their data pipelines, which not only boosts governance efforts, it accelerates new development, shortens time to market, and speeds up their IT modernisation process. Not only are they compliant, they can also leverage the benefits of increased business agility, and facilitate their migration into the cloud. 

Data quality and improved processes

One of the challenges around compliance is the vast quantity of complex data that financial services institutions have to deal with. To meet the growing body of regulation, banks need to ensure that their data is consolidated, validated and verified. This same process that will allow for compliance can, however, also produce a number of business benefits if approached from the right perspective. 

In the case of Absa Capital, meeting regulatory requirements was an important consideration, but over and above that they wanted to enable the business to run more efficiently. Their primary business driver was to implement a new credit management system, but to do that they needed a better handle on customer data. Solving this data integrity problem was a business imperative, but in the process, regulatory compliance was also facilitated. Furthermore, they managed to reduce customer onboarding time from 10 days to just two, including handling all of the compliance-related requirements. 

A dual approach can maximise value

With the growing requirement for compliance throughout Africa, it is easy to think of data as a risk management problem alone, to the detriment of the broader business. Emerging global banks in Africa have the opportunity to avoid the mistakes made elsewhere and provide a data landscape that drives additional business value from the start, driving business forward, improving efficiency and facilitating innovation, while meeting compliance goals.