Leveraging data for better decision making: a lesson from FinTechs to legacy firms

By Gaia Lamperti

A lack of understanding of data is a major barrier to improving business and, when it comes to the financial services industry, that could become the biggest barrier to scaling up. This is what almost half (43%) of the 1,000+ C-suite executives across the EMEA region surveyed for a study about data-driven business decisions have confirmed.

The research, ‘Great decisions come from great conversations’, was conducted by software company Tableau Software and found out that 92% of European business leaders think it is important that the entire organisation are able to access data.

In the UK, more than half (52%) of business leaders believe that the ability to understand insights from data is one of the most important skills for driving quality business conversations, versus only 18% putting the same emphasis on storytelling, therefore suggesting the importance of prioritising hard facts over traditional narratives when making key business decisions.

The study confirmed how the value and importance of data insights particularly apply to C-suite leaders in the financial services, especially in the aftermath of the pandemic. The financial services firms that used more data during Covid to drive decision-making were much more positive about the impact the pandemic has had on their business conversations (55% versus 30%).

“The fallout from the 2008 financial crisis pointed to a desperate need to revolutionise boardroom decision-making, to avoid the potentially catastrophic consequences of overoptimism and pluralistic ignorance that can lead to risk-taking,” Professor Ivo Vlaev, Behavioural Science Department, University of Warwick, who contributed to the research, told IBS Intelligence. “By using data-driven insights, C-suite leaders can not only avoid bias creeping into conversations but understand their customers’ needs better, an approach that competitive FinTechs have nailed.”

Indeed, in the Financial Technology sector, where “legacy establishments are racing to innovate at the speed of new, digital-native FinTechs who offer cutting-edge products and solutions,” as Simon Quinton, UKI Country Manager at Tableau Software, explained to IBS Intelligence, “legacy firms are recognising that one of the key ways their digital-native competitors have grown their business so quickly is because they are harnessing data insights strategically, including using customer data to understand them better, and hyper-personalise their services.”

Theory does not equal practice

However, while the Tableau research showed the value of data in the eyes of senior leaders, only half of them in the financial services sector use data in regular decision-making. Of all leaders in FS, 49% declared they adopt data in decision-making less than weekly, and only 28% of them said that everyone in the organisation makes use of data for business decisions.

“This underlines an ongoing business challenge in establishing a data culture, which is pivotal for innovation, transformation and competition,” continued Quinton. The study found out that the top two barriers to creating a widespread data culture within financial organisations were a lack of understanding of data (45%) and a lack of ability to generate insights (42%). “This suggests that financial services firms simply don’t have the data literacy and tools for employees to utilise big data to inform their work and help drive business success. It’s a real concern that financial services firms are not emerging from the pandemic with data decision making and data literacy at the core,” Quinton added.

Collaboration as the way forward

Solution to this big shortcoming in the financial industry, according to Professor Vlaev, is collaboration. “By partnering with innovative tech firms and FinTechs that have the analysis tools, platforms, and know-how to utilise data insights, traditional financial institutions can reinvent the way they work and revolutionise their culture.”

“But it is critical that senior executives in the field lead by example, and by drawing on data insights in their presentations, board meetings and beyond, they not only demonstrate the value of data-led conversations but can build better business,” he commented.