How Analytics Can Transform the US Retail Banking Sector


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Banks can leverage analytics to transform their retail operations and move to higher profitability and customer satisfaction.

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How Analytics Can Transform the US Retail Banking Sector

  1. 1. How Analytics Can Transform the U.S. Retail Banking Sector<br />Cognizant Research Center | September2011<br />
  2. 2. 1<br />Forces Driving Growth of Analytics in Retail Banking<br />Coming of an Era of Compliance<br /><ul><li>The financial crisis set in motion a wave of regulations. Complying with these regulations requires banks to create enterprise-wide data architectures to remove data silos.
  3. 3. Banks now need to report information that goes beyond historical data. It needs to be risk-based and predictive. New systemic oversight allows regulators to ask for information on an ad hoc basis.
  4. 4. Traditional risk management techniques are now giving way to sophisticated analytics that can enhance decision making by predicting a multiplicity of possible business scenarios.</li></li></ul><li>2<br />Forces Driving Growth of Analytics in Retail Banking<br />Customer Behavioral Shifts <br /><ul><li>Banks that weathered the stormy days are now looking to get back to the basics. But they have lost a lot of trust among customers who are now rely more on advice from friends and family.
  5. 5. Post the global economic crisis, the U.S. savings rate has trended up, while household debt has decreased. This trend is expected to continue, putting pressure on banks’ margins.
  6. 6. Despite the financial strain from the crisis, Generation Y, or millennials, have taken to technologies such as smartphones in a big way. They prefer online banking to in-person branch banking and value good service.</li></ul>Source: TowerGroup<br />
  7. 7. 3<br />Forces Driving Growth of Analytics in Retail Banking<br />Rise of the Millennials<br /><ul><li>The millennial generation is key to banks’ growth in the post-crisis era.
  8. 8. This generation has eagerly adopted new technology, especially smartphones, and embraced social networks in big numbers.
  9. 9. This generation puts an emphasis on online service capabilities.
  10. 10. The growing use of mobile and online banking has led to an explosion in customer-generated data. By applying analytics to this data, banks can reshape their offerings. </li></li></ul><li>4<br />What Banks Should Seek to Achieve Through Analytics<br /><ul><li>Predict future scenarios and enhance compliance.
  11. 11. Gain insights into what makes them unique and put this insight to use to gain a competitive edge.
  12. 12. Drive a customer-centric strategy and improve customer-focused activities.
  13. 13. Improve decision making.
  14. 14. Leverage the emerging Analytics as a Service model to better manage risk and tap three key resources – people, processes and infrastructure bundled together to serve as utility.</li></li></ul><li>5<br />Analytics Green Shoots<br />Compliance & Risk Management <br /><ul><li>Banks are moving towards sophisticated analytical frameworks that take into consideration various aspects from exposure to firm and market liquidity.
  15. 15. Banks can predict future scenarios by juxtaposing historical data against expected events.
  16. 16. Banks can predict if an upcoming product can make the cut in the newly regulated market or predict the kind of response it could generate. This also helps in better capital allocation.
  17. 17. Analytics also improve fraud management by identifying fraud patterns and suspicious activities.</li></li></ul><li>6<br />How Analytics Can Transform the U.S. Retail Banking Sector<br />How Analytics Can Transform the U.S. Retail Banking Sector<br />Analytics Green Shoots<br />Improving Customer Loyalty and Profitability<br />From Multichannel to Cross Channel<br /><ul><li>A unified view of the customer across channels is crucial for successful cross channel banking. Banks can employ Master Data Management software to get a unified view of existing data across the organization.
  18. 18. Applying analytics on this data can help banks deliver a consistent high-quality experience across channels.</li></ul>Better Marketing Campaigns <br /><ul><li>Banks can create new customer segments based on behavior patterns, and push the right product through the right channel at the optimal time. </li></ul>Making Sense of Social Media <br /><ul><li>With social media analytics banks can track customer sentiment and gain a better appreciation on what they think about a new product, leading to possible product enhancements. </li></li></ul><li>7<br />Benefiting From Analytics <br />Building competitive advantage<br /><ul><li>No two banks have the same data. The key lies in tapping into those customer-related bits that banks know to be unique to them.
  19. 19. This data needs to be processed quickly into information. Advances in cloud computing could answer these questions.
  20. 20. Analytics as a service model combines advanced analytics algorithms with utility computing while allowing access to global talent pools in applying and consulting on these issues.</li></li></ul><li>8<br />Challenges Along the Way<br />Given the wide applications, it is imperative that analytics be a key component of any retail bank’s move-forward strategy. <br />However…<br /><ul><li>Banks must resolve data issues created by legacy systems and siloed data management of the past.
  21. 21. Banks must invest in the right talent pool to create analytical expertise.
  22. 22. CEOs must drive an organization-wide cultural shift towards evidence-based decision making</li></li></ul><li>9<br />Embracing Analytics As A Service<br /><ul><li>Business Process as a Service (BPaaS)
  23. 23. Financial services firms are already ahead of the curve in adopting the cloud
  24. 24. BPaaS helps banks save critical Cap-Ex by eliminating the cost of acquiring expensive hardware, software and key talent and allows them to pay depending on their usage. </li></li></ul><li>10<br />Successful Banks Will Do The Following Right<br /><ul><li>DevelopA clear strategy for analytics implementation.
  25. 25. Develop A culture of fact-based decision-making.
  26. 26. Capitalizing on unique data creating an approach that works for them, instead of copying the competition.
  27. 27. Continuously renovating and renewing analytics implementation.
  28. 28. Entering into relationships with the right partners capable of providing analytics as a service to aid their attempts at building and strengthening competitive advantage. </li></li></ul><li>11<br />Thank You<br />Akhil Tandulwadikar, Cognizant Research Center<br />For more information, please visit: <br /><br />Or e-mail us at<br /><br />