Why Big Data is a Big Deal for Banks (And How to Use It)

Recently, I had the privilege of discussing The Big Deal About Big Data at the 2014 Louisiana Bankers Association Technology Conference. While the topic of Big Data historically has been discussed primarily in the halls of the marketing department, more and more, it is becoming a strategic focus across the organization. The reasons for that are many, but as always, the numbers tell the most convincing story.

60% of financial institutions in North America believe that big data analytics offers a significant competitive advantage and 90% think that successful big data initiatives will define the winners in the future. (Capgemini, April 2014)

Big Data constitutes a competitive advantage for organizations, and everyone is jumping in on the game. The topic has loomed large on the radars of bank executives for the past year, and adoption rates are picking up. In a recent Microsoft/Celent poll, 37% of financial institutions responded that they have either implemented or are currently expanding their Big Data efforts. And of those banks with active Big Data strategies already in place, 25% are already working to expand their analytics. 

For banks, Big Data strategies are proving to be a relatively surefire method of producing significant growth in revenue and efficiency, especially in the areas of:

  • Customer acquisition, improving credit risk estimation and maximizing lead generation potential
  • Driving the institution’s share of the consumer’s wallet, using scorecards to predict outcomes of various customer or product groups
  • Limiting customer attrition, nurture customer relations and loyalty programs to gain valuable insight into customer purchasing trends and improving communication with customers
  • Fraud detection, prevention and security, ability to identify and mitigate fraud quickly by monitoring customer usage and spending data 

While it’s true that the fundamental concept behind Big Data is not new, it’s easy to see why organizations are turning to technology to reveal and make use of behavioral patterns, trends and associations. Stored data sets can be much larger and the predictive analytics more efficient, thanks to software that can parse enormous collections of information into operational and analytical uses. 

For banks, making the move to integrate Big Data analytics into the customer acquisition and growth strategy comes with risk. It’s important to realize that this is not a “flip the switch” decision. It is wise to be sure you have a handle on every element of the organization that would be involved in or impacted by the analytics process, including bank culture, capabilities, data and technology. 

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Once you’ve determined the maturity and capabilities of your bank to integrate and utilize Big Data, the process is relatively straightforward. It is vital that your organization address each step in order.

  1. With organizational agreement and clarity around strategic goals, identify your business requirements for data analytics
  2. Identify and train “Big Data Champions” in IT and various business units
  3. Clearly outline data sources and align those resources to meeting stakeholder needs
  4. Consistently assess the value of data against the associated costs of storage and retrieval, considering compliance, privacy and regulatory concerns
  5. Maintain a scalable budget for infrastructure and database analysis tools
  6. Create data sources and analytics, beginning with those that bring the highest value to the organization (increase customer retention, reduce customer acquisition risk, reduce fraud)
  7. Maintain a repeatable process for acquisition and usage of data 

The IDC estimates that data will grow by 650% over the next five years. We’re experiencing nothing short of an explosion in data, and the ability to manage and make sense of it represents significant opportunity for analysis and organizational growth.  

Is your bank already harnessing the potential of Big Data? Are you prepared to continue to expand your use of analytics across the organization? HORNE can help guide you through the process, so that you can apply data to building a better bank experience for your customer base. 

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Topics: Bank Growth, Fintech

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