Why data orchestration is critical to banks and fintechs

Banks and fintechs need accurate, timely insights to make informed decisions about their account onboarding and monitoring processes, credit underwriting, and fraud prevention. That’s why data orchestration is so key to their success.

Without an effective integration that connects to multiple sources, data that’s critical to onboarding, underwriting, and fraud prevention remains fragmented in inefficient data silos. Data orchestration helps streamline your workflows into a single configuration that is more operationally efficient, assists with regulatory compliance, and helps you fight fraud. In fact, it’s no exaggeration to say that there can be no data transformation without data orchestration.

Below, we outline the benefits of data orchestration and how they relate to both compliance and fraud. We also provide guidance you can use when you’re evaluating data orchestration tools.

Taking a non-linear approach to data

Different data sources provide diverse customer insights and banks and fintechs traditionally take a linear approach to data analysis and evaluation. That is to say, they sequentially process the data without considering all the complex interactions at play between the data points.

The alternative, data orchestration, helps you adopt a nonlinear approach. It involves running multiple data sources in tandem to create more complete customer profiles. For example, if one data source rejects an applicant because they previously defaulted on a loan, another alternative data source could provide more real-time information and fill in gaps about that applicant’s recent financial health. As a result, you avoid declining a creditworthy applicant who might have been rejected, and continue moving them through the workflow.

Certain data vendors also specialize in particular data points, like payroll data or accounting data for small businesses. These vendors collect, curate, and deliver high-quality data that banks and fintechs can apply to specific use cases. Other certain data vendors offer the advantage of providing superior global data coverage. For example, a data vendor that focuses on international credit data helps banks and fintechs operate in more regions and countries. With data orchestration, these data sources can be layered together to take advantage of various expansion opportunities.

What is data orchestration?

Data orchestration integrates large amounts of diverse data into a unified system that makes data more accessible and enhances its accuracy. It simplifies the integration to multiple data sources and provides real-time access to consumer identity information, transactional data, external market data, and regulatory data. It also connects to alternative data sources that provide adjacent complementary signals — like rent history, utility bill payments, or secondary income — to standard consortium and credit bureau data.

A data orchestration platform enables banks and fintechs to stay agile in the ever-evolving fraud and compliance landscapes. Organizations using a data orchestration platform can easily reconfigure data sources or add new ones based on internal or external trends, optimizing decisions for desired outcomes.

In contrast to most banks or fintechs’ in-house or legacy tech systems, which require manual data movement, data orchestration uses machine learning to automate data workflows, data validation, and quality checks. In turn, data orchestration helps break down the data silos that lead to incomplete assessments of consumer behavior.

To help put things in perspective, picture a real orchestra. When banks and fintechs have to build an integration to each data source they rely on for onboarding, underwriting, and fraud prevention, their workflow functions like an orchestra tuning its instruments. Because the conductor hasn’t arrived, different notes are being played at different times. You might be able to single out the individual sounds of clarinets or violins, but they are not performing together, and the melody is incongruent.

Data orchestration is the conductor. When it’s at the helm, all data sources have clear direction and play with one another in harmony, and you finally get to experience the full symphony. With data orchestration, your workflow becomes more synchronized, agile, and consistent. You have a greater ability to access its full potential and use that opportunity to stay compliant and fight fraud — at the same time.

Learn more about Alloy’s approach to data orchestration

What are the benefits of data orchestration?

In addition to the increased access to real-time data and alternative data sources, adding a data orchestration framework to your workflow provides many other benefits, including:

• Regulatory reporting and compliance support

• Increased fraud prevention

• Better customer onboarding experience

• Improved time and resource management

• The ability to make faster, more informed decisions

How does data orchestration support regulatory reporting and compliance?

In a global market, compliance requirements vary across regions, and the regulatory landscape is difficult to navigate. Data orchestration makes workflows more customizable, so you can:

• Comply with anti-money laundering (AML), Know Your Customer (KYC), and Know Your Business (KYB) regulatory requirements

• Ensure that the necessary data is collected, stored, and reported accurately to create a transparent data trail that can be used for auditing purposes

• Maintain your compliance programs so they meet evolving consumer expectations

• Adjust your workflow on an as-needed basis to meet risk tolerance thresholds

• Adapt workflows to current and pending legislation

It should go without saying that regulatory compliance is critical. You don’t want to risk regulatory penalties or damage to your reputation while you’re also building new products, opening up new revenue streams, and looking to future-proof your business. Data orchestration helps you strike the right balance between risk management and growth, so you are not opening the business up to unnecessary compliance issues while you are trying to scale.

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Can data orchestration help banks and fintechs fight fraud?

Absolutely. Data orchestration is key to strong fraud risk management — especially as fraud grows increasingly more complex. Data orchestration streamlines onboarding and credit underwriting workflows and allows banks and fintechs to onboard efficiently while they prevent more fraud at origination.

For example, when a workflow uses data orchestration to aggregate data from multiple sources, you can build more dynamic customer profiles and identify a customer's specific spending patterns, preferences, and financial goals. Fraudulent behavior becomes easier to identify because of several factors:

• The layering of multiple data sources

• The consolidation of historical data

• Consistent ongoing monitoring

Data orchestration creates a layered framework so that the data from different sources can be effectively integrated, processed, and analyzed to create a unified view of consumer behavior and more robust customer identity and risk profiles. With these detailed profiles, it’s easier for banks and fintechs to detect anomalies, unusual patterns, and potentially fraudulent activities. Because data orchestration consolidates historical data, current activities can also be compared against past trends to spot discrepancies.

Of course, sometimes, fraudsters do make it past the onboarding process. In these instances, data orchestration assists with ongoing monitoring in real time, so suspicious behavior — like unusually large transactions, frequent account access from different locations, changes to personally identifiable information (PII), or rapid changes in spending patterns — is detected quickly. (For example, banks and fintechs are able to detect first-party bust-out fraud much faster when ongoing monitoring processes that utilize data orchestration are in place.) Remember, when you have a flexible, agile workflow, you’re not only better equipped to identify fraudulent behavior; you’re also better equipped to take action against it.

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How do you choose a data orchestration tool?

When you are exploring solutions to improve the quality of your data and the efficiency of your workflow, it’s important to consider the following questions:

• Is the solution a one-time integration that connects to multiple data sources? (If so, how many?)

• Does it combine real-time data into a single workflow?

• Will it automate decision-making processes using machine learning algorithms to free up more time and resources?

• Does it give you a transparent view into the decision-making process?

• Will it help you create more robust customer profiles and optimize the customer experience?

• Will it be easier to flag suspicious patterns and detect more sophisticated activity like synthetic identity fraud?

• Can you continuously test and implement new data sources before going live?

• Will you have the ability to adapt and optimize workflows quickly in the event of a fraud attack or market shift?

The ideal data orchestration platform will help you build real-time data workflows for a stronger competitive edge. And when you make faster, more informed decisions, you can also deliver personalized customer service and improve the overall customer experience.

How Alloy can help

Alloy is an Identity Risk Solution — an end-to-end platform that manages identity, fraud, credit, and compliance risks throughout the customer lifecycle. Alloy utilizes data orchestration to help banks and fintechs:

• Gain a more accurate understanding of potential customers to reduce the amount of manual reviews

• Leverage the data collected during onboarding and ongoing monitoring to lower fraud rates

• Participate in more progressive onboarding processes where creditworthiness is gradually assessed

• Prevent lengthy verification checks that can cause increased customer friction

• Tailor product recommendations and offers to the customer’s needs

At Alloy, we want to increase the opportunities you have to expand your customer base and help you create greater access to financial services.

Alloy can help verify underbanked and thin-file applicants.