Master Data Management (MDM) why do we need one?
Indian Banks usually are satisfied that the CBS (Core Banking System) is sufficient in generating a unique customer identifier for every new customer. While this is true, consolidation of customer information by tying to a single unique id is dependent on manual process which needs to be compiled by the staff.
It is observed, that many a times when new product is sold to existing customer, a new customer identifier is assigned. For example an existing customer walks into a different branch of the bank. The staff treats him/ her as a new customer, unless the customer himself tells that he is an old customer.
This can happen due to lack of standardize processes throughout the bank, CBS system is not able to check for spelling mistakes, mistakes in addresses, only minimal data or incomplete data is entered, etc. It is pretty much impossible to ensure good quality data, only relying in CBS. Few banks have centralized account opening, which would minimize errors but still human errors cannot be avoided. Over the time, the data quality deteriorates and keeps on deteriorating until the point of no return.
The data quality in Indian Banks is an interesting topic of research. With the data quality a big question mark, it is not a surprise that not many banks use their valuable data to gain insight into their businesses nor do they use it to define their business strategy and marketing strategy. The problem with having dirty data is that, it is ever increasing exponentially and it is just going to sit there in unusable format sucking up resources. Instead of keeping piles of dirty data, why not leverage it to your own advantage? Organized, validated and clean data will give a fresh impetus to your marketing strategy. It is time for banks to look ‘Beyond Core Banking’, to gain a competitive edge over their competition.
MDM can help banks to achieve desired differentiation in the marketplace. MDM will also help banks with their growth and retention goals by giving quick access to Customer and also Household profiles. MDM will help establish a single version of truth across the Bank which can be leveraged by various channels (such as Branch, ATM, Internet, Mobile platforms). Since Marketing is done at a Household level, understanding the needs and profile of the complete household is necessary for targeted Marketing, and providing the Customers differentiated offerings.
An effective MDM strategy enables organizations to:
- Get a 360 degree view of customers to better understand their needs and increase cross-sell and up-sell opportunities
- Complete Household profile, and the wallet share across the household (not just an individual)
- Regulatory compliance and reducing risk
- Improve customer service, retention, and loyalty
- Improve operational efficiencies and reduce costs
- Single view of the truth to improve decision making and strategic agility
RBI guidelines for banks are getting stricter day by day. Recently RBI lashed hefty fines on some big banks for non-compliance with KYC norms. With fines running into crores, banks all over India, have suddenly waken up to the KYC compliance issues. Few banks have even started contacting customers who have opened account in/before the year 2008, to comply with the RBI’s requirement of re- submitting the KYC every 5 years. Similarly, the gate-keeper program of the MDM will ensure there are no KYC compliance lapses.
The banks are contacting all of their customers, who have opened accounts before 2008. Some customers might have changed their addresses in these five years; some might have already submitted the KYC documents. Such blanket approach, might strain banks relations with their customers. All of the above issues can be avoided if the bank has MDM (Master Data Management) in place. With MDM, it would be easy to determine, which customers to contact for resubmission of KYC documents, as MDM takes care of all the change management as well has an audit trail of the changed information.
Recently RBI has issued a circular under the KYC/AML/CFT Guidelines, to give unique customeridentification code (UCIC) to all of bank customers. This guideline is applicable to Scheduled Commercial Banks/ Local Area Banks / All India Financial Institutions/ UCB’s and NBFC’s. What that means, even if one customer has a 2-3 customer id’s with the bank, these records have to be identified and given one unique identification code. With MDM, this would also be taken care off, as it is the master data of the customer.
Conclusion: Indian Banks need to look ‘Beyond Core Banking’ systems. It is the need of the hour. For Banks to comply with the regulatory compliances and to gain insights into their business, Master Data Management (MDM) is not optional any more. It is a necessity!