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Decentralised Data and What It Means for your Bank

November 30, 2022

Ever wondered what data in finance would be like if banks threw off the shackles of convention and embraced them in a new way? Decentralised, productised, safeguarded – these are promised by implementing a data mesh architecture in financial services.

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Imagine a world where the word ‘data’ didn’t have to send shivers down your spine.

Where the thought of managing data wasn’t a by-phrase for dealing with a monolithic, centralised platform that rarely delivered the right data at the right time, hence never giving you the right insights for your bank or financial institution?


Enter data mesh: the accessible, decentralised approach to handling data. In a country where €239 million has been invested into creating data labs for use by the federal government, there is little to no excuse for the financial sector not to follow suit. Here’s how data mesh can play a significant part in taking the German finance industry to the next level.

 


Decentralisation and Data Insights

 

Optimising the way data are handled is vital to the digital transformation of banks as well as businesses. According to a Capgemini survey carried out in April 2022, over 70% of banking executives claimed that incumbent banks had failed to grasp the advantages of data analytics in enhancing their customer offerings.  


In German finance, the decentralised data platform offered by data mesh could lead to increased data insights to improve incumbent banks’ ability to improve customer experience, hence retaining or even expanding their customer base. This may be one way for incumbent banks to win back the business lost to European and global banks; between 2010 and 2019, the revenue share of German domestic banks fell from 70% to 60%.


 

A Secure Way to Do Data

 

German incumbent banks have been undergoing a period of digital transformation in recent years. Removing innovations in data from this would be akin to trying to ride a bicycle without any wheels. The unprecedented level of access to raw and processed data that data mesh enables not only brings internal benefits but could also be a revolution in the way data is shared between incumbent banks and third-party providers (TPPs). A March 2021 report by Mastercard found that 82% of German banking customers had reservations about the use of their data by TPPs. 


Privacy by Design is embedded into data mesh: the security and confidentiality of data built into the architecture itself, rather than an afterthought which is later attached to the architecture. The concept of decentralised, federated data means as few people as possible are able to access certain datasets, increasing security.  


 

Building FinTech Partnerships

 

Data mesh is all about streamlining operations and making them more efficient. By adopting a data mesh architecture, more effective ways of organising teams may become apparent. Productising data means teams take more ownership of said data and the insights they can derive from them. The potential for an entire data ecosystem to be created within the organisation could help bring often disparate and siloed teams together, producing an increased return on investment thanks to a better, more strategic understanding of the bank’s data needs and how to action them. 


A better understanding of data needs and how this might affect the organisation of a bank will also help in terms of forging partnerships. Around 200 partnerships have been formed between German incumbent banks and FinTechs. This is important in an economy with a FinTech adoption rate of 65%, compared with the UK’s 86%. Perfecting data-sharing methods between incumbents and FinTechs is essential to these successful partnerships, which in turn raises the possibility of greater innovation in the financial sector. 

 


Data Mesh and the Future of German Finance

 

Data mesh has the potential to innovate a traditionally conservative incumbent banking sector in Germany. Incumbents having a better grasp on the data available to them, and the ease by which it can be managed through productisation will improve data management while not compromising on data security. 


More widely, data mesh could have a transformative impact on incumbents’ internal processes, their relationships with FinTech start-ups and innovators, and even the experience of customers. 


Want to learn more about how a data mesh approach can be implemented easily in your bank? We've got you covered.