Imagine being able to look at all the data on your customers across your organization to determine the best ways to increase the profitability and loyalty of those clients. Nothing new there -- banks have been doing this in some form for years. It's called CRM, right?
Not quite. Although customer relationship management and the technologies that have grown around it provide banks with some value around data interpretation, the future of analytics lies in business intelligence (BI).
Though the two may be linked, experts say, it is important to understand the distinctions between the two concepts. "CRM is the process of managing information and contact with clients," explains Raymond Dury, CIO with Cincinnati-based Fifth Third Bank ($104.6 billion in assets). "It gives you continuity and history of the contact. That's not BI."
"CRM was about getting information to enhance your customer relationships," adds Jeanne Edwards, a partner with KPMG in Charlotte, N.C. "BI brings in the operational and performance information -- it synthesizes the two to allow for dynamic reporting. It's the move from reactive information to more proactive, predictive data to make more insightful, dynamic decisions. BI is not static data."
Tim Ramsey, an Atlanta-based director in the financial services advisory practice with KPMG agrees, adding, "CRM was originally engineered to do this but ended up being an automation of processes. BI is really around how clean your data is and how well you can extract value from it."
Therefore, when thinking of BI, it is important to look at it in a broader sense than simply the analysis of data. "CRM is one aspect of business intelligence," says Thomas Sanzone, CIO of Credit Suisse (Zurich/New York; US$1.17 trillion in total assets). "BI is looking at a broad spectrum of data around our business -- clients being one dimension, markets being another, transactions another -- to make better decisions going forward."
Part of the problem with CRM on its own is that it produces data but often leaves people wondering what to do with it. The idea behind BI is to change data into something people can use, according to Gary Greenwald, head of global capabilities and information products with New York-based Citigroup Corporate and Investment Banking. "The challenge is turning the data into actionable information," he says.
And by making this actionable information meaningful through BI initiatives, banks can improve their performance, say the experts. According to Ellen Joyner, global financial services marketing manager with SAS (Cary, N.C.), banks increasingly wish to broaden their BI capabilities so that information can be accessed by almost anyone in the organization, beyond the "power users."
Financial institutions should embed this actionable data into the day-to-day work processes of banks' end users, asserts Cindy von Hollen, banking industry principal with SAP (Walldorf, Germany). "What BI boils down to is inline analytics -- incorporating analytics and BI into the natural workflow of the bank," she comments.
Of course, before they can do anything with it, banks need to find, aggregate and cleanse the data. This is no easy feat given the vast amounts of information financial institutions gather enterprisewide.
"Many banks still haven't gotten together consolidated data even at the household level," says SAS' Joyner. "You have to gather the data and clean it up first. Most of the time in getting a BI initiative under way is spent in the data management area."
According to Citigroup's ($1.88 trillion in total assets) Greenwald, his global treasury services group got that message. "The concordance issue -- bringing together all the disparate data streams about our clients -- was important," he explains. This was a complicated challenge, Greenwald says, considering that much of Citigroup's clientele on the treasury management side tends to be large, multinational firms. Since they have operations in many countries, Citigroup debates whether to look at them as one client or as several.
"We're trying to make sense of the structure of our corporate relationships," Greenwald relates. "We wanted a single identity number for a corporate that was universal throughout the bank."
To do this, Greenwald continues, particular attention needs to be given to the quality of existing data. "We have lots of tools that produce data. But whether that turns into actionable data remains to be seen," he says, noting that data flows through an Oracle (Redwood Shores, Calif.) data warehouse. "We are becoming more nuanced in terms of which data is valuable and usable. It's getting it to the point where if we give the data to someone, it's information that's meaningful to the end user's goals." Greenwald adds that Citigroup partners with SAS for some projects while developing others in-house.
One way of making information meaningful is by employing BI tools to drill down into the data. According to Credit Suisse's Sanzone, the bank is moving toward a more client-centric model. Using mostly in-house know-how, he says, Credit Suisse is employing BI like a fine-tooth comb in its customer segmentation efforts.
"For example, in our private bank clients are segmented by their net assets," he explains. "Today we're making much finer segmentations of these clients in our business. So if you have clients that are both worth $3 million, you need to realize there's a distinction between someone worth that much who's 30 versus 60 years old. Their investment profile is very different; the way you sell to them and address their needs is very different. Being able to look at clients and data at a finer level really provides opportunities to drive the business."
Sanzone stresses, however, that successful use of BI may require data that a bank might not necessarily have. "You have to know what data you're missing so you can capture it, analyze it and deliver results," he says. "Some of it might be somewhere in the organization or you have to purchase it or just derive the missing data yourself. That's the difference between success and failure."
Fifth Third's Dury agrees, saying that much of BI is simply about gathering the appropriate raw data in the first place. "We do have a data warehouse," he says. "But for specific things where we don't have the data, we will pull it from data suppliers or create a data history based on what we do have.
The bank's methods typically are homegrown, Dury notes. However, it does employ tools from Business Objects (San Jose, Calif.) "to show striations in the data -- how old is the client relationship, what is their profitability, where is our break-even," he adds. "This is the normal, repeatable analysis that we need on a regular basis."
In Good Hands
Of course, actionable data is only valuable when it is put in the hands of the right people. Dashboards, applications that show data about the business in real time or near real time, are increasing in popularity as a means to push information to managers and staff. "The dashboard-cockpit metaphor works well," Credit Suisse's Sanzone says, adding that there is real value in dashboards, especially as global banks expand their reach and product complexity.
"It's important as we run a complex global business that we build these dashboards and efficiently manage the business. It's knowing out of all the thousands of things going on at any one time where we need to focus our attention," Sanzone explains. "You've got to deliver the information, particularly the exception information, that really warrants the attention of the necessary people."
But sometimes getting information into the hands of the necessary people can be a challenge, notes KPMG's Ramsey. "You can't really push BI tools on a teller platform because they aren't designed for that," he explains. "You have to create a new layer to get this real-time, actionable data delivered to the front lines. That will be the next step in BI."
After all, the end goal of BI is to improve the ability of bank employees to make better decisions that ultimately will lead to better performance, profitability and customer loyalty. And much of the information BI delivers is designed to create customer stickiness, observes David O'Connell, a senior analyst with Wellesley, Mass.-based Nucleus Research. "BI should be geared a little more toward the customer service rep who faces the customers so that they'll know everything about that customer and what they might be most likely to buy next," he says.
Moultrie, Ga.-based Ameris Bank ($2.1 billion in assets) employs technology from Banker's Dashboard (Stockbridge, Ga.) to disseminate information to front lines. "This is the tool we use to push results down to each branch -- the branch officers and staff members," explains Dennis Zember, the bank's executive vice president and CFO. "It helps us compare how our salespeople are doing at each branch. Before [implementing the tool], it was hard to provide meaningful information."
One area in which Ameris has leveraged Banker's Dashboard is the collection of loan fees, which account for a large portion of the bank's monthly income, according to Zember. "About a year and a half ago, we collected about $300,000 a month in loan fees," he relates. "Then we started holding people accountable to the information that was on Banker's Dashboard as to who was more productive. These loan fees have doubled to about $600,000."
Share and Share Alike
In order to realize enterprise gains from BI, however, a bank's separate lines of business need to play well together. Questions concerning business/IT alignment and data ownership and sharing must be overcome for BI to succeed.
"People have to get used to sharing data," says Nucleus Research's O'Connell. "So it's important that you have a mandate from the business side to drive the technology people to deploy these tools and overcome any resistance to change."
But the resistance can be considerable. Brad Scott, product manager with Open Solutions in Glastonbury, Conn., says that attitude and turf wars among business lines can be bigger challenges than data silos when it comes to derailing data-sharing efforts. "That's one of the benefits of using a data processing provider," he claims. "The bank itself doesn't have to go to the disparate systems and take the data out -- we do it for them."
Scott stresses that one key in successfully getting line-of-business managers on board with data sharing -- whether an in-house initiative or third-party engagement -- is to ensure that the shared data is read-only. Preventing unauthorized personnel from making changes to the information is critical for both regulatory compliance and internal cooperation, he suggests.
BI Sells Itself
Management buy-in, however, may be most critical to successful data-sharing initiatives and fostering cooperation among lines of business, adds Ameris' Zember. After all, he says, "If nobody at the top is using the information, sooner or later no one's going to pay attention to it."
But according to Fifth Third's Dury, BI makes its own business case. He explains that BI tools illustrate the collections of patterns in data to gain a better understanding of relationships that straight analysis alone cannot. "For instance, we're good at selling credit cards," Dury says. Using BI, however, "We noticed a pattern in the data that showed we don't do too well percentagewise with selling cards to our existing customer base."
As a result, the bank developed a cross-selling strategy based on the results of the enterprisewide data analysis. "This project crossed the retail and credit cards systems in the bank. The reality is we're getting much better relationships with our customers," Dury claims. "We provide them with a card that's both a credit card and ATM card so they don't have to carry two cards around or use a competitor's credit card."
To keep the technology component of BI initiatives on track, according to Steve Clement, SVP and director of IT strategic initiatives for Charlotte, N.C.-based Wachovia ($700 billion in assets), it is vital to articulate to the business side who it is they should deal with in IT. "We have to make it clear for our business partners who they should engage in IT," he says. "This brings clear accountability around who your '1-800 number' is in IT and who will meet your business model in IT."
To foster business/IT alignment, Wachovia assigns relationship managers to liaise between IT and the business lines, which makes both sides more in tune to one another's needs, according to Clement. IT also is graded on just how well it meets business goals by employing a BI-based scorecard system, he adds. "We have a CIO scorecard where our five divisional CIOs are graded on about 30 metrics around how we operate, like business partner satisfaction and delivery of service," Clement says.
According to the experts, CIOs should get used to BI-related metrics. Citigroup's Greenwald says analytics-intensive BI activities will become more and more common in the industry. "Banks as an industry are getting it," he says. "You're even going to see the notion of BI professionals arise increasingly -- people who can span both the technology and banking side. This makes for an interesting type of person to have on a team."
All banks will recognize the value of BI, suggests Ashwin Goyal, vice president of financial services industry strategy and marketing with Oracle. "There is remarkable potential in BI, particularly around unlocking the value of the investments banks already made," he says. "BI will allow banks to do relationship-based pricing and product bundling. Some banks will look at dynamic product integration so these things can occur at the point of contact as a rep is speaking to a customer. They'd have a more interactive selling dialogue."
"BI is the future of banking," comments KPMG's Ramsey. "There's a major push to reduce head count and cost, and deliver positive experiences through lower cost channels so customer preferences are delivered more efficiently and effectively."
This will all happen, adds KPMG's Edwards. "It's just a matter of who's going to harness this information and commit to it. BI will be a big competitive differentiator going forward." **