How are analytics bringing financial institutions closer to customers?

gen_d_industry_heatmap_got_dataIf customer centricity is the question, analytics is the answer for financial institutions.

The financial services industry has entered a new era. Financial institutions (FIs) are transforming from a simple, transaction-focused banking model to an advanced, data-based approach. Why? They’re eager to improve sales, do more focused marketing through multiple channels and strengthen customer engagement. Changing customer preferences and rising demand for transparency in charges has also become a major challenge. In short, FIs need to become more customer-centric. And to do that, organizations need the power of analytics – getting the right information at the right time to target the right client with the right products and solutions.

While there are – and will continue to be – complexities with using so called “big data,” doing nothing is not a viable option. And firms are finding ways to overcome such barriers. According to the industry breakdowns from the latest IBM Business Tech Trends study, analytics deployment in the banking industry has risen from 65 percent in 2012 to 78 percent in 2014.

btt dashboard banking
Click to view the interactive dashboard

The need for speed

So, when I say financial services is undergoing a transformation from a traditional model to an advanced data-based approach, what is driving that change? One of the biggest factors is speed – shrinking time windows: time to market, time to interact with clients, time to launch new products, time to identify new markets, time to make strategic decisions and more. Analytics allow FIs to analyze data faster to gain new insights. Whether it is launching a new product or retaining an existing client, risk management or regulatory compliance, analytics can be game-changer across the institution.

Data analytics can help financial institutions:

  • Become more agile and more customer-centric based on a deeper understanding of their clients
  • Adapt rapidly to changing market conditions
  • Improve services through more personalized interactions
  • Manage and mitigate enterprise risk and ensure compliance

Where are FIs looking for insights?

Click to enlarge (Generation D Study – http://bit.ly/gen_d)
Click to enlarge (Generation D Study – http://bit.ly/gen_d)

As adoption of analytics grows among financial institutions, what kind of data are they analyzing? A recent IBM Center for Applied Insights study reveals that three in every five financial institutions uses transactional data (e.g., credit card swipe, POS, ERP, etc.) for analytics. More than half are using audio (55 percent) and mobile application data (51 percent). Given that transactional data and call center driven audio data is produced in abundance in retail banks, these two being most prominently used is not too surprising. What is striking is the use of social media data – nearly half (45 percent) are tapping structured social media data and 33 percent are even tackling unstructured text.

Banks are often thought to be slow in embracing the power of social media. But, this shift toward social media analytics is a great sign. Social media analytics could be another game-changer for banks. Within this huge chunk of social conversations resides a wealth of valuable information for institutions – areas where they need to improve, new product requirements, product reviews, clues for audience targeting, competitor positioning, product promotions, brand awareness and more. Given these potential benefits, I fully expect social media analytics to gain further steam.

This same study also highlights the types of analytics being used by financial institutions: 83 percent perform basic querying and reporting. Predictive modeling is another area where institutions have started to invest, with 72 percent using it in decision making. This usage is likely to grow since customer retention and cross-selling are key ways for financial institutions to enhance revenue.


Re-published on Forbes on May 19

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