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Banks must think big but start focused

By David Hartley

True understanding of data the only competitive differentiator…

As banks are no longer able to differentiate themselves by product or pricing, they need to understand, and leverage off, the mountains of data they hold on their customers.

Of paramount importance today, is a bank’s ability to mine its data in order to understand what has happened and what will happen. In order to begin turning data into true intelligence, banks must think big, but start focused.

Banks face the problem of tight IT budgets on the one hand, and heavy business ‘pains’, or challenges on the other. However, too many organisations still have data silos dotted throughout the organisation, reducing the effective use of this data. For example, a bank may be able to intelligently analyse a particular churn problem, but remains unable to relate this to credit scoring issues.

The ability to start bringing this data together, and move from silos to an integrated architecture, is the only way forward.

Today it is extremely easy and quick to copy new banking products that are released. Pricing is also very similar. It is therefore almost impossible for a bank to differentiate itself, or gain competitive advantage, using product or price.

True understanding of your data is the only competitive differentiator in the market-pace today. Banks recognise that they need to understand the past and then, more importantly, predict what will happen.

Data sharing can enable a financial services group to see, for example, that those clients who are bad credit risks are also the clients who tend to make fraudulent insurance claims.

This enables banks to start by focusing on specific ‘pains’, such as credit worthiness or customer retention. However, they need to ensure that their investments pave the way towards achieving the overall corporate goals.

The architecture of banking intelligence solutions must support individual solutions, be extendable and able to integrate with existing and future solutions.

This approach enables you to add onto the architecture any additional areas that become hot topics, yet ensures that the architecture remains extendable, and flexible enough for banks to customise.

Recalibration is key. There cannot possibly be a 100% fit for a South African, Slovenian and Puerto Rican bank. Clients therefore do not need a fixed data model but one with which they can work.

Banks have woken up and have recognised the need to manage marketing spend. They also want to be able to treat customers in similar ways across touchpoints, and always in a customer-centric manner. Only by the intelligent use of customer data can banks co-ordinate their actions with each customer.

For banks wishing to achieve competitive advantage from the intelligent use of data, the tools they choose must enable them to add future solutions. They should also check that the vendor brings true knowledge and understanding of both the entire banking industry, as well as the specific business pains the bank is experiencing.

The pains of today will not be the same pains as in five years’ time. You need a long-term partner approach.

I believe that South African banking can be genuinely proud of its use of technology in the business and analytic intelligence area. South African banks are working to develop best of practice solutions and their use of analytics is as leading edge as anywhere else in the world.

David Hartley is director of Industry Intelligence Solutions at SAS Institute, a market leader in providing business intelligence software and services.

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The Big Change is a business strategy blog and newsletter published by Arthur Goldstuck, managing director of World Wide Worx, a leading technology research organisation based in Johannesburg, South Africa.

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