Busienss intelligence in banking sector


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Busienss intelligence in banking sector

  1. 1. Business intelligence and Data warehousing <ul><li>Business Intelligence in Banking sector </li></ul><ul><li>Naveen Gupta 09BM8033 </li></ul><ul><li>Vipin Dutt 09BM8091 </li></ul>
  2. 2. The KPI in retail banking <ul><li>The KPI in retail banking may include the factors that have links to the performance of a retail bank. </li></ul><ul><li>There may be several KPI to measure the performance. However, it is important to keep the number of KPI to a minimum and to choose KPI's that have direct attributes to its performance. </li></ul>
  3. 3. The KPI in retail banking <ul><li>The total cash deposits held in a month </li></ul><ul><li>The average annual deposits held </li></ul><ul><li>Average number of depositors per retail bank branch </li></ul><ul><li>Average withdrawals made by each depositor </li></ul><ul><li>Ratio of active depositor to dormant depositor </li></ul><ul><li>Average number of default borrowers in a year </li></ul><ul><li>Average number of credit cards issued by the retail bank </li></ul><ul><li>Rate of borrowing risk </li></ul><ul><li>Rate of default risk </li></ul><ul><li>Average number of customers served in a day </li></ul><ul><li>Average number of closed bank accounts </li></ul>
  4. 4. Performance measure for banking sector <ul><li>CAMEL Model </li></ul><ul><li>CAR Ratio </li></ul><ul><ul><li>Measure of bank capital as a % of risk weighted credit exposure </li></ul></ul><ul><ul><li>RBI norms: CAR 8% </li></ul></ul><ul><li>Asset quality </li></ul><ul><ul><li>Net NPA to Net Advances </li></ul></ul><ul><ul><li>Total NPA to Total assets </li></ul></ul><ul><li>Management </li></ul><ul><ul><li>Profit/Business per employee </li></ul></ul><ul><li>Earning </li></ul><ul><ul><li>Return on asset </li></ul></ul><ul><ul><li>Net interest income to total asset </li></ul></ul><ul><li>Liquidity </li></ul>
  5. 5. Need of business intelligence and Data warehousing <ul><li>Risk Management </li></ul><ul><li>Probability of loan default and expected recovery of loan default – Important for loan pricing </li></ul><ul><li>Credit cards early detection and prevention of frauds </li></ul><ul><li>Analyzing credit portfolios, enabling banks to quickly identify potential delinquency cases </li></ul><ul><li>  Determine overall financial health </li></ul><ul><li>Information about volatility in current economic environment </li></ul><ul><li>Accurately estimating the risk of customer loans based on: The financial assets and earning capacity of the borrower </li></ul><ul><li>The prevailing economic climate </li></ul>
  6. 6. Contd… <ul><li>Improve operational efficiencies and boost profit </li></ul><ul><li>Generate massive internal efficiencies (eg: analyzing the performance of sales personnel, tellers and account managers) </li></ul><ul><li>Track individual revenue streams to determine profitable and non-profitable services and products </li></ul><ul><li>Understand growth patterns to maximize the chance of repeatability </li></ul><ul><li>Set key benchmarks for crucial metrics such as the number of net new customers and their profitability, compare them against industry standards, and track them towards defined goals </li></ul>
  7. 7. Contd… <ul><li>Customer segmentation </li></ul><ul><li>Required to defined profitability amount of service and attention to be provided to customer </li></ul><ul><li>Better understand customer needs and sentiments regarding banking </li></ul><ul><li>Effective tailored product and services to a segment </li></ul><ul><li>Effective customer profiling according to the segment </li></ul><ul><li>  Determine profitability across branches and products </li></ul><ul><li>Identify and develop new cross-sell and up-sell opportunities and marketing campaigns accordingly </li></ul>
  8. 8. Contd… <ul><li>Pushing new product to existing customers </li></ul><ul><li>Need to maximize profit by cross selling and upselling of product to existing customers </li></ul><ul><li>Cost of selling product to existing customer is five times lower than selling to new customer </li></ul><ul><li>Improve customer relationship and customer loyalty </li></ul><ul><li>Effectively and efficiently satisfy customer needs and demands </li></ul><ul><li>Their latent needs have to be gauged and then should be approached with relevant product </li></ul>
  9. 9. Contd… <ul><li>Securing Existing client / Reducing churn rate </li></ul><ul><li>Utmost attention to maintain customer relationship and </li></ul><ul><li>Uncovering the reasons behind customers switching to a competing institution </li></ul><ul><li>Tracking changes in customer behavior so products of services can be tailored accordingly </li></ul><ul><li>Segregate customers into the baskets and focus on the needs of most profitable customers </li></ul>
  10. 10. Contd.. <ul><li>Regulatory requirement </li></ul><ul><li>Regulatory requirements indicated by the RBI for preparation of Off-site Monitoring Surveillance (OSMOS) Reports on a regular basis in electronic format </li></ul><ul><li>Asset Liability Management (ALM) guidelines for banks being implemented by the RBI w.e.f. April 1, 1999 </li></ul><ul><li>Regulatory requirement of filing of statutory returns such as the one under Section 42 of the Reserve Bank of India Act, 1934 </li></ul><ul><li>Need for timely submission of Balance Sheets and Profit & Loss Accounts </li></ul><ul><li>Need for Inter-Branch Reconciliation of Accounts within a definite time frame </li></ul>
  11. 11. Role of Business Intelligence <ul><li>Provide tools that can be used to understand customer behavior </li></ul><ul><li>Efficiently coupled business strategies with the IT infrastructure and skills </li></ul><ul><li>Can collect and transform millions or record/transaction for analysis </li></ul><ul><li>Support strategic goals of gaining competitive advantage </li></ul><ul><li>Gives and ensure bright prospect for the future </li></ul><ul><li>Efficiently customers needs </li></ul><ul><li>Gain advantage over competitors </li></ul><ul><li>Fulfills the regulatory requirements </li></ul>
  12. 13. Fact table for all accounts
  13. 14. Multivalued Dimensions
  14. 15. Arbitrary Band value reporting
  15. 16. Point in time balance
  16. 17. Heterogeneous product : Specific line of business schema
  17. 18. Examples <ul><li>Bank of India </li></ul><ul><li>Faster time-to-market thus making the Bank of India 'Business Agile' </li></ul><ul><li>Enabled BOI's focus on core business activities </li></ul><ul><li>Reduction in the Total Cost of Ownership (TCO) of the project and a high level of predictability on future cash flows </li></ul><ul><li>Increased productivity, standardization, consistent service levels and customer experience </li></ul>
  18. 19. Examples contd… <ul><li>ICICI Bank </li></ul><ul><li>Establish business intelligence market leadership in the fast-growing Indian financial market </li></ul><ul><li>Develop tailored marketing campaigns that have boosted customer acquisition rates significantly </li></ul><ul><li>Helped the bank optimize its delivery channels across 400 shop fronts, 1,600-plus ATMs, multiple call centers and Internet banking services </li></ul><ul><li>Non-branch transactions have grown from 5 per cent to 50 per cent of all transactions in a two-year period, representing an important revenue source for the bank </li></ul>
  19. 20. <ul><li>Thank You </li></ul>