Banks to bet big on data analytics

by Sohini Bagchi    May 23, 2013

data analytics

Data Analytics enables enterprises to manage and automate large volumes of data in order to enhance decision making and achieve their growth objectives. According to a NASSCOM report, the Indian data analytics market is expected to grow at a CAGR of 25 per cent to become a $1 billion industry by 2020. The banking sector in India is also realizing the importance of data analytics and many consider it as a key area of their IT investment.

Understanding customers better

A recent KPMG report on IT investment in banks also reveals that 41 per cent of the banking executives said the most important IT-related project for their bank in the next one year would be leveraging data to enhance customer growth and value. As a result, many banks have either deployed or are in the process of deploying some kind of data analytics solution. For example, Central Bank of India has deployed IBM analytics to streamline its financial management processes. According to M V Tanksale, Chairman and Managing Director, Central Bank of India, by leveraging data analytics the Bank will be able to get a consistent view of each customer across all bank branch and product lines and uncover hidden insights in customer data. This is turn will help us in making smarter decisions to boost customer satisfaction and profitability.

Agrees Shrawan Kumar, General Manager – IT, Allahabad Bank as he states that CIOs should consider data analytics to understand consumer behavior, for segmentation and to develop an insight on what to provide their customer.The bank is working on some high end data analytics projects and is planning to go live in the next few months. “Banking has become a highly customer-centric industry today, especially with the evolution of Core Banking Solution (CBS), a huge amount of data is generated every minute. It is essential to analyze these data sets to understand your customer better and most importantly, to determine the right channel to reach out to the customer,” he says.

“Banks are becoming more actively engaged in using data and analytics to extrapolate insights that help improve risk management and compliance, drive customer growth, increase operational efficiency, develop and refine product offerings, and more,” says Judd Caplain, Advisory Industry Leader for Banking and Diversified Financials at KPMG. According to Caplain this trend will continue as banks recruit more data and analytics experts for exploiting information to help increase business activities.

Harnessing the data

However, even though most banking executives believe that analytics can help take better, more profitable decisions about their customers, experts believe that banks are yet to harness the maximum benefits of data analytics. As Damiano Cracolici, Head - Decision Analytics at Experian Services India points out in a recent article in Businessworld that banks need to use data analytics in all the keystages of the customer lifecycle that include customer targeting, customer acquisition, customer management and finally, collection. In most cases, banks deploy analytics at its basic level or miss out a step that decreases the efficacy of operations. He explains, “Banks can use data and analytics to reduce delinquency, manage cost of collections, manage attrition and reduce wasted time. Analytics can likewise help them understand which customers are worth retaining for the future.”

Cracolici states in the article that data analytics can play a very important role in ensuring that banks can manage the risk and reward of their commercial decisions. He says, “to bridge this gap between information and the effective use of it, modern DA solutions should also bring with them the capability to determine what would be help banks in cutting down the time it takes for actionable information to reach decision-makers.” This in turn will help them in improving the value of information and provide them with a decisive edge over competition.