Boosting Performance with Analytics in 2012

By Omer Sohail, Accenture

In the wake of the financial crisis, the banking industry will be significantly reshaped by technology. Indeed, by 2012, technology-driven innovations will be more important than ever to help banks regain the high performance they seek.To understand the scale of change that is required and identify appropriate responses, Accenture recently conducted a survey of bank leaders, bank analysts and private equity firms called "Banking in 2012." We also analyzed and modeled the fundamentals of over 150 banks globally, validating the results with clients.

One key implication from Accenture's research is that there are compelling reasons for banks to transform their core information management technologies. Market and regulatory pressures are driving a fundamentally different economic model for banks, leading to increased demand for timely, accurate and insightful information. Armed with such data, banks can improve decision-making and compete more effectively by increasing market share and better managing risks. Done correctly, that transformation can generate an increase in profitable customers, significant revenue uplift, and five-year savings in excess of one billion dollars at larger institutions through a combination of enhanced analytic capabilities, improved data quality, reduced systemic complexity and lower operating costs.

Customer pull. Successful banks will "pull" customers-rather than "push" products-through a greater use of business intelligence and more robust analytics. To do so, banks will need an integrated and intelligent view of their customers that enables them to quickly identify potential needs and match solutions at the customer level.

The new battleground in 2012 will be the branded customer experience. Therefore, understanding who your customers are-and their preferences-is vital. Applying analytics, data points can be identified-customer spending habits, the type of products they are interested in-that leads to customer segmentation which, in turn, enables banks to promote the right products to the desired customers through the appropriate channel.

Given the dramatic increase in velocity of today's banking transactions, Accenture believes that banks need to leverage near real-time data access and analytics to identify customer marketing opportunities. For example, large scale deposits may signal the need for investment products and significant expenditures may indicate a need for homeowners insurance. The key will be to identify the opportunity and act quickly, before customers change their minds or go elsewhere.

Revenue uplift. Business intelligence will play a key role in increasing top-line revenue over the next few years. Some financial services companies have already made strides in turning the mountains of data they collect and store into a competitive advantage. Using a robust analytic solution, for example, one firm was able to increase sales five-fold while reducing the call volume of its sales force by a factor of six. Another company achieved a 150 percent improvement in cross-selling and up-selling effectiveness.

A large credit card provider recently consolidated all of its data-including servicing, cross-product spend and demographics-in order to get a single view of its customers. As a result, it successfully launched new credit card and personal loan products for its customers, while reducing losses through improved servicing and account management.

Following a merger, another financial services firm used a data warehouse solution to get a 360 degree view of it customers, products and services, resulting in an increased retention rate of its most valuable customers from 77 to 90 percent and a 20 percent average increase in customer profitability.

Cost savings. Rationalizing the data warehouse environment, reducing data redundancy, standardizing analytic and reporting tools, and reducing higher-cost resources with lower-cost alternatives (such as global sourcing) can all help deliver substantial cost savings.

Additionally, predictive analytics can help avoid potentially high costs. For example, better analysis of credit worthiness, proactive monitoring of loan portfolios and enhanced screening of customers can reduce credit reserves, write-offs and fraud.

In a new era of lower margins, analytics enable more targeted marketing and increased pull-through rates for banks, compared to traditional broad-based direct marketing approaches. Building a robust analytical capability, however, requires much more than just collecting and storing data in large quantities. There are many moving parts to put in place, including software applications, technology, data, processes, metrics, incentives, skills and culture. Accenture's assessment is that banks that can harness all these pieces by 2012 will be among the industry's high performers.

Omer Sohail is a Dallas-based senior executive at Accenture. He leads the financial services industry practice of the Accenture Information Management Services group.