Business Intelligence for Banks

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Business Intelligence is Intelligent Banking

According to Section 5(c) of Banking Regulation Act, “A banking company is a firm which transacts the business of banking in India”. The business of banking is based on accepting and lending money. In a bank, money is constantly on the move, received in the form of deposits, payments and given in the form of loans and withdrawals.

For a single account, for a single product, for a single year, there could be hundreds of transactions that could have taken place. The transactions could run into thousands for a single product and multiple customers. Let’s imagine the combined volume of data that could be present for all the products and services offered by a bank, for its millions of customers (across all the disparate systems). It sums up to one very large data set that the bank needs to deal with, and to analyze it in order to make decisions. Let’s not forget that this data ought to amplify based on the growth of the product and services and with the increase in the customer base in the coming years. Thus, it becomes imperative that bank has a powerful tool to convert this data into information.

It is not just due to data volumes, but also due to ongoing regulatory changes, interest rates holding at historical lows (and likely to remain unchanged for an extended period of time), banks’ profit margins being squeezed, banks are seeking new sources of revenue and are developing new methods for understanding and deepening their customer relationships. This is where Business Intelligence (BI) tool, a familiar concept in banking comes into picture.

What experts have to say?

Garter defines BI as a software platform that delivers functionalities such as integration, information delivery and analysis. A 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. It encompasses analytics as well as the processes and technologies supporting data management like collecting data from disparate sources, data cleansing or generating insightful reports. BI is generally defined as software application that supports organizational decision-making by turning historical and transactional data from various sources into actionable information.

In fact, as Forrester indicates that business intelligence has been listed as the top technology priority for CIOs across all industries for the last five years. Talking about Gartner's 2012 CIO survey, it showed that analytics and BI is the No. 1 technology priority for CIOs in 2012. Coming to the facts, worldwide business intelligence (BI) platform, analytic applications and performance management (PM) software revenue reached $12.2 billion in 2011, a 16.4% increase from 2010 revenue of $10.5 billion.

You just can’t do without it anymore…

The BI market is rapidly growing among many segments, especially mid-tier banks. Recent changes in the regulatory environment have turned BI from a ‘nice to have’ into a ‘must have’.

Nowadays, business intelligence has become more cost effective, attainable and accessible to end users due to the growing trend towards pervasive use of BI technologies. BI was historically an ‘after the fact’ application, used at the end of the month or the quarter to review historical data to understand operational efficiency, customer trends and sales productivity. But today, banks are increasingly looking to make BI a part of the day-to-day, operational business processes rather than strategic, and this requires a different technology approach. This is achieved through, implementation of intelligent technologies into staff’s everyday tools (mobile & desktop) and use of collaboration technology (alerts and emails).

With the emergence of Smartphone’s and tablets, more computing power is available in the hands of senior executives who are always on the move. This strengthens the case for BI since some of these tools have features like dashboards that even work on mobile platforms. So, the executive can slice and dice information, literally on his fingertips, while taking a boring flight to his next business meeting.

There are still some banks which are puzzled with the fact of developing BI internally or outsourcing it to a vendor. Building a BI tool requires tremendous efforts with respect to time, money and people. Basis on rationality, one can say that only those banks which have advanced IT capabilities and are ready to invest the resources & stay dedicated (for a long time) can venture into such task. Though, a more feasible option will be to leave this to a vendor who is a banking domain expert and offers an industry standardized product with capability of customization. This will assure the bank that they are in good hands and can relax and focus on what they do best i.e. accepting & lending money.

BI projects are termed as long term investments, so banks which have decided to go for such implementation should be targeting vendors not with just basic, standard BI capabilities like dashboards and alerts but also with features such as pre-configured analysis (for various domain areas), ready for implementation and offers master data management as a part of the solution.

I am a business intelligent bank

Banks that are using a BI tool, find them having a competitive edge as compared to their peers. Some of the key benefits that these banks are enjoying are:

  • Evaluation of Banks Portfolio – distribution, concentration and exposure
  • Product Customization - Focusing on profitable products & services, improvising on feeble products thus improving the bottom line of the banks
  • Customer profitability - Understanding customer’s attitude, usage pattern and temperament to improve customer relationship
  • Faster response to customers
  • Real time automation for regulatory authorities and management
  • End-to-end BI platform aligning all the business processes and providing a single version of truth
  • Making ‘quick’ & ‘fact’ based decisions with the help of improved data quality and enhanced reporting capabilities
  • Constant Monitoring results improves the business agility

Banks are targeting at exploiting their data assets to the fullest by capitalizing on the capabilities of business intelligence (BI) software, particularly in areas such as customer intelligence, performance management, financial analysis, fraud detection, risk management, and compliance. With enhanced features focusing on data quality, master data, and metadata, banks are using BI as an opportunity to improve management over operations.

Due to growth in data volumes and other economic changing dynamics, banks are looking for some basic features in any BI solution, i.e. they should be scalable, can grow with the growth in the bank, without much further investment. BI solution should be flexible, for instance it should be able to accommodate new source systems, if added, without any disruption in the smooth flow of the current analysis.

Look out for them

As per Gartner research, over the next five years banks on the forefront of BI are likely to financially outperform their peers by 20%.

Integration of all the processes is the key to the success of any BI tool implementation. There are still areas where data is being maintained in excel (old competition of BI). It provides the users with the data analysis capabilities and interactive visual tools. Unless & until banks understand the need for bringing all the functional areas under a single BI tool, we cannot say that the Bank has fully harnessed the tool’s capabilities.

In 2013, mobile will continue to be hot, especially with more and more devices making their presence known. Microsoft releasing Windows Phone 8, along with the Surface tablet and the ecosystem of Windows 8 should make things interesting. Banks will be planning to continue to enhance the mobile experience for their customers. Thus IT vendors should understand this trend and bring this area under the purview of BI.

Most considerable technology for banking will be cloud. While there is a risk involved, but with the help of the vendor and banks due diligence, there is a growing possibility that some of the selected services can be moved to cloud and can eliminate upfront licensing costs and decrease under used hardware.

Experts in the industry believe that BI is going up steps from being reactive to proactive. Instead of real-time information, decision makers in banks now are asking for BI systems that predict the future. Predictive analysis can be used in many areas of banking, such as cross selling. For instance, if bank has this power to predict then they can determine which new offer will interest which customer.

Hence, there is no question as to the value which can be delivered to a bank through a well implemented and well leveraged BI platform. Vendors offering BI as a part of their solution to banks should look out for the above trends and try and incorporate them in the product offering.

Ramco Systems

Ramco systems, a known name in the IT industry, delivers a full spectrum of innovative, agile enterprise solutions and services for the banking and financial service institutions. It provides comprehensive web architecture solutions, flexible & scalable, ranging from Business Intelligence Platform for Banks, ADF solution, Loan Origination system, Cash Management system and more.

Ramco Banking Analytics (Business Intelligence Platform) seamlessly integrated platform, very well understands the phrase, ‘time is money & money is tight’. Hence, it provides quick implementation with the help of pre-configured analysis (ranging such as loans, deposits & many more) and features such as layered architecture approach to couple the various layers of the applications in terms of presentation layer, application layer, infrastructure layer, data access layer etc. thus facilitating a “plug and play” of components. Keeping pace with the latest technology, the product range is available and functional on Smart Phones and tablets.

To know more about it, check out their website!!!

Blog by : Ms. Jasneet Bagga, Senior Business Analyst , Ramco Systems