IDC: Navigate the New Banking Landscape with Advanced BI
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IDC: Navigate the New Banking Landscape with Advanced BI

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Learn how financial service organisations operating in the new world of banking can leverage advanced BI to answer big data questions.

Learn how financial service organisations operating in the new world of banking can leverage advanced BI to answer big data questions.

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IDC: Navigate the New Banking Landscape with Advanced BI IDC: Navigate the New Banking Landscape with Advanced BI Document Transcript

  • Navigating the New Banking Landscape With New Analytical Approaches WHITE PAPER Sponsored by: Actuate A lex K wi atk o ws k i Ma rc h 2 0 12www.idc-fi.com IDC FINANCIAL INSIGHTS OPINION ● With ongoing market volatility creating considerable anxiety among already fraught-nerved investors, institutions in the wealthF.508.988.6761 management and private banking segment need to adapt not only to a fast-changing operating environment but deliver new standards of service excellence to customers whose expectations, needs, and wants are continually rising. ● Customers awareness and use of new technology is alsoP.508.620.5533 continuing to rise exponentially in line with the development of new consumer-oriented devices, applications, and services. Consequently, institutions need to meet the needs of their increasingly "tech-savvy" account holder by deploying appropriate services which allow for a greater uptake of self-service. ThisGlobal Headquarters: 5 Speen Street Framingham, MA 01701 USA encompasses several facets, including — significantly — analytical and reporting capabilities, which give improved insight into financial affairs on a timely basis. ● The benefits of new analytical approaches are not restricted to external, customer-facing activities. Internal, business-side users can also gain substantial benefit from leveraging BI tools to interact with and manipulate data in an intuitive manner through real-time reporting. Crucially, whereas the provisioning of BI solutions has historically been prohibitively expensive and complex, institutions are today able to deliver BI to more parts of the business in a more cost-effective manner. By broadening the use of BI (and by using a suitably scalable solution), institutions drive operational efficiencies, increase transparency, and enable better decision making (and thus mitigate, negate, or avoid potentially damaging risks). These are imperative objectives in the transformed banking industry of the 2010s. ● There has never been a more pressing need for more effective, wide-reaching BI and analytics capabilities in the wealth management and private banking sector. The emergence of Big Data — which IDC defines as "a new generation of technologies and architectures designed to extract value economically from very large volumes of a wide variety of data by enabling high-velocity capture, discovery, and/or analysis" — has given institutions a major challenge to overcome. March 2012, IDC Financial Insights #IDCWP06U
  • SETTING THE SCENE2012 will be another challenging year for the financial services sector.However, rather than retreading a well-worn path and diagnosing thevarious ills and ailments affecting institutions, let us insteadprincipally concentrate on the alleviating remedies.In essence, we believe the success of wealth managers and privatebanks in the remainder of the 2010s hinges on them having the abilityto perform a "chameleonesque" adaption to the habitat in which theyfind themselves operating in at any given period. Moreover, such atransformation requires institutions to possess the combined strength,suppleness, and dexterity to perform a finely poised balancing act.Banks must carefully offset the needs and expectations of regulators,customers, and shareholders, while ensuring they are sufficiently well-capitalized to withstand further jolts to the financial system; capable ofprotecting market share by launching innovative new products which,above all, are safe (or at the very least have the dangers identified,quantified, qualified, and adequately mitigated); explore the unchartedwealth management opportunities which undeniably exist in keyemerging markets; and to extract maximum value from the ITsystems which power business activities.BI solutions play a pivotal role in helping institutions adjust tochanging market conditions and achieve the aforementioned poise. Atthe heart resides the overwhelming need for bank executives (andclient relationship managers) to be able to make fact-based decisions(and recommendations) using information drawn from a plethoraof trusted data sources and collated into a suitably visual report(which is easy to interpret quickly and confidently). To be clear, thisneed has not simply arisen out of nowhere in 2012: institutions havebeen grappling with the task of optimizing their BI tools on a continualbasis since solutions first came to market more than a decade ago.What differs now is that the need for more effective, wide-reaching BIcapabilities in the private banking and wealth management segments isof mission-critical importance, especially in light of the recent industrytravails.In our opinion, the banking industrys most successful institutions willbolster their service delivery standards by means of enhancing andextending BI and analytical capabilities in accordance with thechanging market landscape. While these activities will not serve as thesole agent for success (other functional, environmental, technological,and political factors will also be influential to varying degrees),making a more "intelligent use of intelligence" unquestionably has theability to deliver tangible operational and financial benefits.In this white paper we first describe how institutions operating in anever-transforming banking world must deliver exceptional clientservice. Secondly, we examine how institutions can successfullynavigate this new banking landscape by making the best possible useof a BI solution, and the tangible benefits this strategic planning willafford.Page 2 #IDCWP06U ©2012 IDC Financial Insights
  • EXCELLENCE IN A NEW BANKING ERAEmpirical evidence indicates that service quality is one of the mostimportant differentiating factors in wealth management and privatebanking. But best-in-class products, investment performance, andqualitative sound advice without acceptable service quality are nolonger sufficient selection criteria for most high-net-worth (HNW)clients. To satisfy clients expectations, institutions must establishwhich services are viewed as all-important differentiators, and thenhow quality thresholds can be raised to a best-in-class standard.In 2012, we believe those relationship managers tasked with managingthe financial affairs of HNW individuals need to find answers to aseries of pertinent questions to deliver an exceptional experience.Therefore:● How can I allocate more time to my clients with unmet requirements?● How can I identify the best cross-selling opportunities?● Which of my clients are showing signs of attrition risk?● How can I increase my clients perception of service quality to raise the level of overall satisfaction?● How can I improve the confidence of my clients (and prospects) at a time when trust in financial services has been significantly eroded and an unhealthy degree of skepticism abounds among even the wealthier/wealthiest members of society?There are also broader considerations for institutions — rather thanindividual relationship managers — to ponder. For example, how canappropriate use be made of digital channels for the provision of privatebanking and wealth management services, and what specific toolsand applications must be provided to enable greater client self-service? One component of this enhanced self-service is the ability tooffer BI and reporting capabilities to clients that wish to gaingreater, faster insight into the performance of their investmentportfolios (and any other financial products).The provision of an excellent experience does not rest purely onanswering these questions. Of equal importance is the ability to reducerisk and ensure regulatory compliance, thereby insulating valuableHNW customers from potential losses or asset portfoliounderperformance. Importantly, whereas such activities were onceupon a time, not so long along viewed as the sole preserve of thoseemployees whose business cards featured the words "risk andcompliance" on them, in 2012 the task of identifying, mitigating, andnullifying risk needs to be the responsibility of everyone within aninstitution.Today, the CEO is expected to play a far more prominent role in riskmanagement, as sponsor and advocate of integrated enterprisewide©2012 IDC Financial Insights #IDCWP06U Page 3
  • risk reduction programs. They are required to lead by example, byplaying a prominent role in the creation of a robust risk-based culture(where managing and reducing market, credit, and operational riskbecomes an accepted, ingrained responsibility for employees in everystrata); assuming responsibility for regulatory compliance; andproviding the final, crucial check and balance when signing off keybusiness initiatives, such as the implementation of new, improved BIsolutions designed to address the issues associated with risk,improve decision-making, and raise operational efficiency.Importantly, the use of these solutions must extend to a far widerextent than has been seen historically.DELIVERING BETTER BI CAPABILITIESFrom our perspective, business-led analytics and BI solutions must —without delay — become more pervasive within institutions in order tocreate a stronger culture of risk avoidance and averseness. Sinceinception, BI applications have predominately been used by a narrowband of internal niche specialists (those with a "business analyst" jobtitle, for instance). Given the acute pressure banks currently findthemselves under in the market, and with trading conditions unlikelyto improve markedly in the long term due to an anemic economy,extending and broadening the reach of BI in the quest to driveoperational efficiencies, increase transparency, and enable betterdecision making is eminently sensible.As risk should be every employees responsibility, and raising servicestandards is vital, so suitable tools must be provided to achieve theseobjectives. Ergo, a BI solution has to be capable of scaling to supportan increased number of employees without a detrimental impact onapplication performance (evidenced by slow or erratic running and alack of quality in the reporting of integrated data). And, as mentionedelsewhere, giving clients the ability to use a dedicated BI applicationfor self-service account management/monitoring purposes also helpsto deliver the improved user experience which all institutions arestriving to achieve on a sustained basis.To achieve this scalability and flexibility, institutions must be willingto embrace alternative approaches to deploying BI and analyticstechnologies. A premises-based solution (i.e., where the bank ownsand maintains a dedicated server and software licenses provided on aper-user basis) is no longer the only option available: cloudimplementations (be they private or hybrid) and on-demandservices give banks the ability to push BI capabilities quickly andcost-effectively into new functional areas. That is not to say that on-premises has had its day: far from it in fact. Rather, this demonstratesthat at a point when IT investment budgets are under intense strain, thedelivery of new solutions and an improved user experience can beperformed in a creative way to maximize the available financialresources.One further point merits mention. Following the emergence of BigData, managing and interrogating information has assumed a wholePage 4 #IDCWP06U ©2012 IDC Financial Insights
  • new degree of significance and mission-critical importance. Big Datarelates to a constant stream of information which must be monitoredand analyzed for operational purposes. This includes both structuredand unstructured data, with social interactions, mobile devices,facilities, equipment, R&D, simulations, and physical infrastructure allcontributing to the flow. It encompasses hardware and software thatintegrates, organizes, manages, analyzes, and presents data that ischaracterized by the "four Vs" — volume, variety, velocity, and value.Big Data has the potential to unlock latent operational and financialvalue, but extracting maximum value is far from easy. Indeed, webelieve financial institutions are struggling to tackle the challengespresented by Big Data. Existing disk-based storage solutions are beingexposed as wholly inadequate when it comes to sifting the informationwhich flows rapidly along the Big Data stream in real time or near realtime.Solving — or at least getting a handle on — Big Data is a major itemon the agenda in 2012. Tackling Big Data is not a straightforwardmatter of implementing a single system. Rather it involves acombination of the right technologies and tools, the right workflowsand processes, and adequate analytical capabilities. Ultimately, it willrequire extensive investment in datawarehousing, data integration, BI,data visualization/reporting, and business-led analytics.RECOMMENDATIONSActions to ConsiderWe recommend institutions involved with the provision of wealthmanagement and private banking services perform the followingactions:● Extend BI solutions further into the organization beyond the realm of the dedicated business analyst and onto the desktop of the client relationship manager.● Empower customers by creating and deploying tools that can offer enhanced self-service BI and reporting capabilities for those who want to create potential scenarios.● Recognize the need to improve BI and business-led analytical capabilities in accordance with addressing the challenges associated with Big Data.● Avoid sacrificing innovation on the regulation and compliance altar. Institutions can still innovate — in terms of products, services, and underlying technologies — providing the risks are understood and managed effectively. BI can undoubtedly help map out this "journey of discovery."©2012 IDC Financial Insights #IDCWP06U Page 5
  • ● Investigate the effectiveness and scalability of existing BI solutions. Where this investigation reveals inherent gaps or failings, consider the implementation of a new toolset.● Avoid paying lip service to the notion of service excellence. Instead of merely talking a good game, institutions must deliver the promised user experience by leveraging BI technologies to their best advantage.Copyright NoticeCopyright 2012 IDC Financial Insights. Reproduction without writtenpermission is completely forbidden. External Publication of IDCFinancial Insights Information and Data: Any IDC Financial Insightsinformation that is to be used in advertising, press releases, orpromotional materials requires prior written approval from theappropriate IDC Financial Insights Vice President. A draft of theproposed document should accompany any such request. IDCFinancial Insights reserves the right to deny approval of external usagefor any reason.Page 6 #IDCWP06U ©2012 IDC Financial Insights