The dual effect of a slow global economic recovery combined with increased regulatory and compliance burden are causing banks to be watchful about every rupee they spend or invest. Despite these barriers, banks are expected to grow consistently in terms of revenue, market share and profits and at the same time adhere to regulations and keep their customers engaged. The Indian banking industry has witnessed several transformations over the past decade. One of the most significant and recent transformation which is making its presence felt in a big way is ‘the big data wave’. Data has emerged as new asset class. At the vanguard of this transformation are the organisations that have managed to drive a culture of data-driven decision making in order to drive business objectives, manage fraud and mitigate risk. The true value of big data lies not just in having it, but in being able to use it for fast, fact-based decisions that lead to real business value.
Driving business objectives and engaging customers:
Analytics has opened up the world to new possibilities and consumers’ expectations are changing. Banks must start looking at their customers more closely and using data to gain further insights. Data quality and data management tools can help banks create a single-view of their customers and also create views based on household levels. On the other hand, customer analytics can help banks to ascertain the right offer/messaging based on the customer’s past interactions and also identify the right communication channel and time. This helps increase customers’ probability of accepting an offer and hence the propensity of purchase. From a bank’s perspective, it helps increasing up-sell & cross-sell, gauging a customer’s lifetime value, determining a customer’s preferred channel of communication, reducing costs, minimising contact fatigue, acquiring right set of customers and inducing loyalty.
Mitigating risks and curbing fraud:
Indian banking industry presents excellent opportunity for sustainable growth however, with growth opportunities comes the risk of risk of potential threats and fraud. The number of banking channels has also been increasing over the past years, this makes the systems more vulnerable than ever before. For instance, first-party fraud is a growing problem for banks. Since fraudsters act much like legitimate customers, it is hard to detect this at an early stage. Most financial institutions rely on transaction monitoring and business rules methodology to detect fraud. These work at an initial stage however, they gradually fail to work effectively since the fraudsters then learn the rules and start operating below the radar. The key is to act proactively and work towards curbing tomorrow’s fraud today. Predictive analytics helps a long way in doing so. It can help organisations in adopting a ‘hybrid approach’ via which they can leverage the current transaction monitoring system and business rules and at the same time execute a forward-looking approach that flags-off potential future threats. Social Network Analysis (SNA) also complements the fraud management framework by enabling users to visualise the transaction network of individual investors and detect hidden suspects.
Embracing an analytics mindset:
The Indian banking industry was certainly an early-mover in embracing analytics. Thus, there is no major scarcity of analytical skills, capability or technology in this industry. That said, keeping analytics and business intelligence available only to a select few in the organisation or considering it as an IT initiative, is an inappropriate approach. Organisations need to gradually move towards building an enterprise-wide culture of data driven decision making. Making valuable facts, information and reports available to business users will be crucial in modern times. In order to gain full advantage of analytics ability, banks will be required to think beyond dashboards and accept analytics as an enterprise-wide cultural driver.
Owing to the increase in number of communication channels, regulatory guidelines, market maturity and structured and unstructured data, the importance of analytics in banking is constantly on a rise. Banks need to think beyond dashboards and adopt analytics as a culture which enables business users in taking fact-based decisions in near real-time. Approachable analytics can act as a common string that synergises vital business functions such as acquisition, service, risk, fraud, operations, etc. While hindsight and insight were important till yesterday, gaining valuable foresights about business operations, customer preferences and risk mitigation will act as a core growth driver and a competitive advantage in future.
Sudipta K. Sen is the Regional Director – South East Asia, CEO & Managing Director - SAS Institute (India).
SAS is the leader in business analytics software and services, and the largest independent vendor in the business intelligence market. Through innovative solutions, SAS helps customers at more than 65,000 sites improve performance and deliver value by making better decisions faster. Since 1976 SAS has been giving customers around the world The Power to Know®. SAS has been in India since 1997. SAS India operations are headquartered in Mumbai with regional offices in Bangalore, New Delhi and Pune. SAS works with organisations across Industries and offers them Analytics & Business Intelligence to fuel innovation and meet their business objectives. Year on year SAS has been leading the Advanced Analytics market in India with majority market share. It has also been awarded as one of the best places to work for by the Great Places to Work institute. Information on SAS India operations can be found at www.sas.com/india