The Next Generation of Analytics: Are Financial Institutions Prepared?

Today’s consumers have high expectations − and for good reason.  They have become accustomed to, and are increasingly likely to demand, anytime/anywhere connectivity and access to the products, services, and information they desire and need.

These expectations carry over to their banking relationships, and banks are focused on keeping pace with their rapidly changing requirements.  Analytics is on the front-lines of this quest.  Just like customer expectations are evolving, so too are analytics solutions.  Are banks prepared to adopt and benefit from next-generation solutions?

Banks have long been early adopters of analytics technology.  Over the last several decades, power and role of analytics has grown exponentially in financial services firms and beyond. Thomas H. Davenport, research director of the International Institute for Analytics and a pioneer of Analytics 3.0, provided the following timeline and perspective on the evolution of analytics:

  • Analytics 1.0:  Born in the mid 1950’s, this generation of analytics incorporates basic business intelligence and key performance indicators to assess past performance.  Analytics 1.0 enabled managers to examine data from production processes and customer interactions to improve the performance of their institutions.
  • Analytics 2.0:  Emphasized by the big data boom of the mid-2000’s, analytics 2.0 explored the power of predictive analytics and pulled data from multiple sources outside of a company – not just data that was generated solely by the organization’s own internal systems.
  • Analytics 3.0:  The next generation of analytics combines the descriptive and predictive qualities of past generations and adds an increased focus on prescriptive analytics – the use of models to specify optimal behaviors and actions.

In the 3.0 era, analytics will be embedded as a part of real-time decision making.  In essence, it will become the bank's intelligence core and enable institutions to place the customer at the center of the enterprise like never before.

Putting the Customer First

The rise of analytics 3.0 enables financial institutions to make their customers the number one priority like never before.  Analytics 3.0 optimizes value to both parties, enabling banks to expand their ability to know, in real time, what their customers want and need.  This, in turn, will provide banks with the information they need to effectively create and offer products that are uniquely positioned to them – whether it be mobile deposit capabilities or an enhanced chat function via a banking application.

The possibilities are endless when it comes to creating personal banking services based on the data collected from analytics 3.0.  For example, social media channels provide the opportunity to capture rich data such as information on life events that might drive financial purchases.  This insight enables precision marketing that strengthens relationships and customer intimacy while empowering financial institutions to optimize the use and impact of their marketing budget.  Further, this next generation of analytics can offer banks the ability to analyze customer transactions in real time and map behavior against past trends – enabling the institution to effectively coach customers toward behaviors that can optimize their investments, credit standing, and relationship with the bank.

Before financial institutions can fully realize the benefits analytics 3.0 can provide, there are several questions they must consider to help prepare for the progression, including:

  • Can our infrastructure deliver the extreme performance that we need?  Firms need high performance infrastructures that can scale easily with their needs to reap the full benefits of this valuable data and deliver real-time insight and intelligence.
  • Can we easily handle all types of data?  Gaining a 360-degree view of the customer is critical to calculating and optimizing profitability.  To accomplish this, firms require a unified or industry-specific data model that can accommodate both structured and unstructured information from all critical sources.
  • Do our analytical applications put the power of real-time insight into the hands of line-of-business managers?  Real-time insight is the foundation for analytics 3.0.  It is imperative that business users have up-to-the-minute information at their fingertips.
  • Do we have deep, native, and/or flexible integrations between our enterprise resource planning; enterprise risk management; governance, risk, compliance; customer insight; and enterprise performance management environments?  Complete and reliable integration between these transactional and analytical applications enables firms to rapidly connect business intelligence with business processes and deliver the agility needed to bring new levels of intimacy to client relationships.

As financial institutions begin to develop and perfect their analytics capabilities, they must keep an eye towards future requirements and technologies.  The ability to capture, manage, and analyze the enormous amount of data flowing through organizations from a variety of sources cost effectively depends directly on an institution’s technology infrastructure and capabilities.  Ensuring that these critical components are in place will enable banks to retain loyal customers and reap the full benefits of insights derived from analytics 3.0 – putting them one step ahead of the competition.

Are you ahead of the competition?  Is analytics at the center of your banking universe?  We’d love to hear your thoughts.

Ambreesh Khanna is the Vice President of Product Management for Oracle Financial Services Analytical Applications at Oracle. He can be reached at ambreesh.khanna AT oracle.com.

Comments:

This really is a challenge, people really do demand connectivity everywhere. You bring up an excellent point, that the need for analytics is really important for financial institutions.

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Posted by guest on August 22, 2014 at 12:47 AM EDT #

Great insights. I agree the Financial institutions would be caught on wrong foot if they are not prepared. Thanks for the great info.
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Posted by guest on November 10, 2014 at 02:03 PM EST #

Great insights. I agree the Financial institutions would be caught on wrong foot if they are not prepared. Thanks for the great info.

Posted by guest on January 06, 2015 at 11:52 AM EST #

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