From outside the financial industry looking in, banks appear to be nothing more than institutions built on money movement. And why not? Money is constantly coming and going in the form of deposits, withdrawals, loans, payments, etc. One might not realize it, but a checking account or even an individual’s entire life savings is simply a record in a database that is updated each time a transaction is made. Multiply this transaction by the thousands (or in some cases millions) of customers and multiply it again by the number of products and services offered by a bank, and you’ll realize that banks are sitting on a tremendous amount of data. So why do many of these institutions lack adequate tools to harness the power of this data?
“Business intelligence” (BI) is the process of unlocking advanced analytics and reporting capabilities and using them to help navigate a bank’s data to identify new opportunities, manage and mitigate risks, and make fact-based decisions. As the technology to access and analyze this data continues to advance, banks are realizing that they are sitting on a data gold mine! In fact, Forrester indicates that business intelligence has been listed as the top technology priority for CIOs across all industries for the last five years.
If BI is an unfamiliar concept, think about the popular website Mint.com. As a customer, your bank can now deliver the same financial analysis tools to the palm of your hand, on demand, or with each monthly statement. More importantly, as a bank, imagine the opportunities available by having the same financial profiles across all your customers. This is just one example from a single data type that will likely play a significant role in how banks look to differentiate their offerings.
Turning today’s challenges into tomorrow’s opportunities
The economic landscape of the past few years has been challenging for everyone. With increased regulation and interest rates holding at historical lows (and likely to remain unchanged for an extended period of time), banks’ profit margins are being squeezed, in turn causing them to seek new sources of revenue and develop new methods for understanding and deepening their customer relationships.
Additionally, the banking industry has experienced considerable consolidation over the past few years. There are nearly half as many banks today as there were a decade ago due to mergers, acquisitions, and bank failures. This process has generally created substantial growth in the surviving institutions. Although the growth has benefited a number of banks, the acquiring institutions are finding it challenging to integrate systems, interpret their new data, and understand the impact to their existing portfolios.
On the other hand, banks that have developed their BI capabilities are experiencing a competitive advantage relative to their peers. The ability to do advanced analytics by combining data from disparate and unconnected data sources has unlocked the potential to better:
- Identify cross-sell opportunities by providing a full view of a customer across all products
- Determine customer and product level profitability and differentiate services based on this data
- Evaluate portfolio concentration and exposure and run stress tests
- Reduce costs of gathering, formatting, and distributing data across the organization
- Put the right information in the right hands at the right time for improved decision making
Business intelligence technology continues to improve
Although BI is not a new concept, its recent growth in priority is partially due to new and advancing technology that makes BI more achievable, cost effective, and accessible to end users. Business intelligence vendors across the industry continue to step up their game and deliver powerful and robust solutions. With enhanced features focusing on data quality, master data, and metadata, banks are using BI as an opportunity to improve management over operations.
And demand for business intelligence solutions continue to grow
Business intelligence continues to remain a top focus for banking industry CIOs and executive teams. Across North America, we see banking clients looking at ways to transform data into a more powerful organizational asset. At a time where information is consistently growing in volume, variety, and complexity, information management has become a cornerstone to the success of these institutions.
The size and complexity of current efforts have varied from powerful “out-of-the-box” solutions to full-scale “custom solutions” that transform organizations to be more data driven. Whether the problem is data quality and governance or analytics and reporting capabilities, banks are being proactive in acquiring the tools and capabilities necessary to make fact-based decisions and refocus their attention from data gathering to data analysis.
Business intelligence tools: Preparing banks for the future
The ability to better serve banking customers by having timely and accurate information available is proving to be an invaluable asset, especially in a market where pricing is relatively flat across the industry. Now more than ever, banks need to focus on ways to differentiate their offerings and to understand and retain more profitable customers by plugging into customer relationship management (CRM) and other client-facing processes.
There is no question as to the value of a well-implemented BI platform. The investment in BI continues to separate institutions looking to maintain the status-quo from those looking to position themselves as industry leaders. This is further supported by Gartner research which indicates that over the next five years, organizations on the forefront of BI are likely to financially outperform their peers by 20 percent.
Implementing a reliable, single source of authoritative data demands buy-in from across the organization and will require collaboration between business and technology. With the obvious efficiency gains, banks are seeing a compelling business case for business intelligence solutions.
The potential to unlock new and valuable insights from organizational data continues to present an incredible opportunity to banks and other financial institutions.