Customer insight is the new currency for banks

Connie Leung, Senior Financial Services Industry Director, Microsoft
Connie Leung, Senior Financial Services Industry Director, Microsoft

It is an unprecedented time in the industry with extremely high regulatory scrutiny of banks and capital markets firms, coupled with an acute need to grow deposits and revenue streams in the light of increasingly diverse competition. To address these challenges, two key roles in financial institutions have risen to the forefront of business strategy: the Chief Risk Officer, and the Chief Marketing Officer. Although facing different priorities, they do have something in common as they transform the business: data analytics.

Today’s financial institutions are seeing the use of data as a new form of currency in an industry used to processing, calculating and analyzing data. Combining current, more traditional data with less traditional, unstructured data streams, and feeding them into an analytics solution, can help CMOs interpret the life of the customer, how they use your product and where there’s an opportunity to meet an unmet need. There tremendous customer insights which are critical for financial institutions to gain customer wallet share and stay ahead of the competition.

Regulations such as Basel III and the U.S. Foreign Account Tax Compliance Act (FATCA) are having a profound effect on the business models of financial institutions in Asia even though the region faces less regulatory pressure than in the U.S. or Europe – KPMG reported last year that Basel rules and FATCA top the list of banks’ worries in Asia1.

Therefore, regulatory compliance and risk management remain top priorities for banks as they look to navigate in the “new normal”. The economic crisis of 2008 highlighted the importance of counterparty measures that could help mitigate the potentially far-reaching impact of economic risks, such as a fiscal or liquidity crisis, which is still one of 10 risks considered of “highest concern” in the World Economic Forum Global Risks Report for 20142.

While regulations are often perceived as an impediment to innovation and growth, a Microsoft customer, Maybank, the largest bank in Malaysia, has shown that adherence to compliance can enable the bank to mitigate risk, enhance bargaining leverage, improve cash flow, raise employee productivity and gain supplier visibility but also keep pace with changes in the business as well as the regulatory climate. The implementation of a contract management tool to improve supplier relationships and automate management of contracts with the necessary controls to mitigate risks and drive compliance was named the winner of the Reporting and Compliance Implementation Award (Risk Technology Implementation) for 2013 by the Asian Banker.

In the recent Celent report on “How Big is Big Data”3, 95% of banks responded that risk management is top of mind. Microsoft believes the industry is ripe with opportunity, but it falls to risk managers to take a balanced approach in mitigating risk, while allowing for continued business growth.

The Royal Bank of Scotland, a Microsoft customer, needed a powerful analytics platform to improve performance and customer services. To handle multiple terabytes of data and an unprecedented level of query complexity more efficiently, the bank implemented Microsoft Parallel Data Warehouse. As a result, it gained near-real-time insight into customers’ business needs as well as emerging economic trends, cut a typical four-hour query to less than 15 seconds, and simplified deployment. Another customer, Credit Suisse, is using our data analytics platform, enabling employees to view risk across various organizational silos globally.

Microsoft recently commissioned IDC to conduct research across industries to better understand what businesses globally—including the financial sector—stand to gain by propagating a “data culture” across their organization. The numbers were eye-popping.

The research showed that, over the next four years, financial services institutions and related companies worldwide have the potential to gain more than US$308 billion in value from data, or what we call the “data dividend”. Of that amount, US$131 billion of value is forecast to come through improvements in areas such as human capital, IT optimization and regulatory compliance measures – including risk management.

How then should a financial company harness these new streams of data, and the capabilities of machine learning and cloud-based analytics tools? They can look to cloud-based, big data analytics is a viable solution as they offer flexible, high performance computing capabilities that give financial institutions the context they need to deal with emerging risks appropriately. Companies should consider the following guidelines to harness the full potential of data, both big and small:

  1. Information vs Knowledge: There is an inherent difference between information – the raw data that lives within an institution’s computer network, and knowledge – the understanding of how to harness and apply that information. This nuance is especially critical in making decisions for banks, capital markets firms and insurance companies that are seeking to monetize data. Without education and understanding, the value of the information will be unrealized and the opportunity to analyze and use it lost.
  2. Democratization of BI: The potential of that information is only as useful as the ability to access and use it by the appropriate people. Microsoft advocates the democratization of BI through self-service tools. Although IT must retain control of data, the tools for the analysis and interpretation of data insights must be in the hands of business users. Ensure employees across all levels of the organization understand the potential of data and have the tools in place to analyze, visualize and share their findings.
  3. Start with “what if” scenarios and questions. Don’t drive a business initiative by thinking about data management and what can be collected in an Enterprise Data Warehouse. Think about what insights are needed to properly assess a risk.
  4. Begin with an easily quantifiable, easily manageable project that promises unique insights. Then, build on that success. Make sure that the data platform you’re building on can scale as you expand the scope of your big data initiatives, both in terms of raw data processing power, analytics, and ability to surface insights in widely-used productivity and collaboration tools.

By using modern, cloud-based data analytics solutions, and analysis tools that allow business users to visualize and interpret information, risk managers can combine legacy and on premise, cloud- based and third-party data into one, truly single source of truth that helps them deftly anticipate and mitigate risks as they emerge, and stay the course in fulfilling the company’s vision.


This story was first published on Bank IT Asia on December 16, 2014.





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