By Jason Young
Q: I think we’ve finally gotten past all the hype surrounding “Big Data” to discover that financial institutions are truly beginning to get a firm grip on their enormous amounts of stored information. With that in mind, how can my bank best use business intelligence tools to improve our decision-making processes?
A: In business, many strategic decisions are made based on what happened or worked in the past. You build upon successful ideas, and discard those that fell flat. But today — particularly in the financial services industry — looking backward is woefully insufficient. In fact, it’s a little like crying over spilt milk.
Pressure to recoup lost revenue from the recent financial crisis and create new revenue streams is critical to the industry. And the interest rate environment brings another unique set of challenges. To succeed today, and years from now, we must understand what lies ahead on the horizon. What — we’re tasked with discovering — happens next? In other words, what if…?
Automated business intelligence solutions can help financial institutions answer those questions by sorting through their reams of “Big Data” and extracting pearls of wisdom about consumers’ needs — leading to increased profitability and customer retention. The tools gather data across systems that have the ability to “talk” to each other, and give institutions a 360-degree view of the customer. And, some may argue, the most valuable facet of business intelligence tools is their power of analytics in addressing a variety of “what if” scenarios.
According to Gartner’s report, Predicts 2014: Big Data(1), Big Data analytics can help organizations better understand customer behaviors, make processes more efficient, reduce costs, and increase their ability to detect risks and threats. It also reveals that:
- 64 percent of surveyed organizations either have invested in Big Data already or have plans to invest within 24 months; and
- Of those that have invested, 25 percent have already deployed to production and are addressing business problems ranging from process improvement to enhancing customer experience.
Through innovative dashboards, financial institutions can employ analytics to evaluate information as never before, using statistics to reveal trends in historical and transactional data and determine where their best opportunities — and greatest risks — lie. Additionally, a deeper dive into your Big Data can uncover why certain efforts succeeded or failed in the past — whether by the bank’s actions or by overall market conditions.The following examples offer insight into what your institution can achieve using business intelligence tools:
Detect and Prevent Fraud. Through analytics, you can better detect fraud and money-laundering patterns — in real time — by looking across customers’ transactional information to spot and flag unusual activity, as well as viewing geographical data to perceive if certain locations are seeing a higher percentage of fraud occurrences. An institution can assess this collected data about customers and transactions in its dashboard to monitor and differentiate between isolated events or genuine trends.
Set Deposit Rates. You can improve your ability to make the pricing decisions that will help your institution get and keep deposits by combining business intelligence software with your own historical data and insight. The software can digest and analyze massive amounts of complex information, including data on historical customer behavior and attributes like transaction activity, banking product purchases, price sensitivity and income. The solution breaks down these thousands of records and combines them with your institution’s unique goals to help calculate the rates it should set. You can perform multiple “what if” scenarios to determine the cause and effect on not only deposit volume but also other bank products and services.
Perform continual stress testing. Regulators want institutions to demonstrate an awareness of their portfolios to ensure that no single area takes up too high a concentration. Analytics enable stress testing to occur continuously across the organization, ensuring greater efficiency and reducing risks well beyond the intermittent stress test.
And the benefits go much further. Institutions have reported greater employee productivity and increased efficiency with such processes as credit risk assessments and credit scoring. Additional actions can determine:
- How to best deliver an omnichannel experience to address consumer demands.
- The effects on balances after pricing changes.
- What products and services customers have bought. And why?
- The necessary insight to intelligently cross-sell to your customers.
- An understanding of your most — and least — profitable customers.
- The new products and packaged services that should be created to answer customer needs.
Still, as the competitive landscape heats up and the battle for customer retention escalates, looking through a 360-degree lens to enable the best possible business decisions can undoubtedly give your bank a sizable advantage.
(1) http://www.gartner.com/document/2626815?ref=ddrec