Predicting Success In Banking & Politics: It's All About The Analytics

Known for his 2012 election predictions, Nate Silver recently shared insights about the relationship between data and progress and how the growth of data doesn't always increase understanding. Silver, founder of the award-winning political website FiveThirtyEight.com, explained that "as you increase the data points you increase the relationships, this increases the signal-to-noise ratio," as discussed in his book The Signal and the Noise: Why Most Predictions Fail -- But Some Don't.

A group of more than 100 financial services executives and technologists listened to Silver's keynote at the recent SAS Financial Services Executive Summit, which included three points of advice about analytics:

• "Think probabilistically" -- as Silver illustrated with maximum flood stage predictions, in which a margin of error of plus or minus several feet can lead to catastrophe.
• "Know where you're coming from" -- or put another way, bad things can come from several directions -- including where you aren't looking.
• Try and err" -- even a business idea based on using only 20% of maximum possible effort can deliver 80% accuracy, offering increased profit and a competitive advantage.

Silver concluded that successful firms link characteristics of context, culture and competition -- picture the intersection of three circles. Constant A-B testing happens at that intersection, driven by a firm's willingness to question conventional wisdom as well as that of the market in which it competes.

[Banks can learn a lot about big data from what other industries are doing; read What Can Banks Learn from the U.S. Government's Big Data Initiatives?]

Aligning business and technology

Many banks are haunted by the challenge of aligning technology and business in the age of big data analytics, attempting to decipher how business and IT could work better together and clarify who exactly owns the data. In the first of two panel discussions at the Summit, Martha Jane (MJ) Avstreih-Ross, Enterprise Information Management Executive of RBS Citizens Financial Group explained how success is visualized by her team as a first step. They then spend time on requirements and focus projects on real revenue enhancement and expense reduction. Avstreih-Ross believed the owner of data is the business itself -- not a specific department -- with data governance being a core objective, and the resulting "pool of watermarked data" is the company's raw material.

Ann Woloszynski, Administrative Vice President, Enterprise Risk Management, of M&T Bank discussed her bank's cultural evolution toward data governance and how the demand of Federal Reserve regulations was a catalyst to delivering higher quality data more efficiently via "middle out instead of top down." For example, Woloszynski described process changes made to the bank's FR Y-14 submission that "improved efficiency by 50% in six months." Her advice was to weave data management and governance into product origination systems, to ensure ownership of analytical models and to build in regulatory compliance across applications and data sources. Woloszynski's parting comment was how executives are now more eager "to do more of what will help us better manage our business" in data management and governance areas.

James Miller, Vice President, Enterprise Decision Support Systems, of USAA shared how all projects begin with the mission of serving member needs of their members. At USAA, business owners can take advantage of a lab, staffed by both business analysts and IT professionals, to get quick and iterative results on data analysis that delivers revenue lift or expense reductions that are balanced with the core competency of member experience. Miller explained that USAA has lots of data stored for insights and how his team is focused on getting these insights to actions. Also, executive support has been very helpful since USAA CEO is "a big fan of data and analytics."

Customer experience and digital

The second panel focused on how data and analytics are reinventing the understanding of customer experience as interactions move from physical to digital channels. Kathryn Black, Customer Offers and Targeting Executive, Global Marketing and Corporate Affairs, of Bank of America shared how the bank is now organized by segment -- preferred, retail, small business -- to make banking a lot easier for customers. Her team has built a marketing data platform with a 360-degree customer view to determine client needs from the perspective of customer experience. The bank is on a journey to seamlessly integrate all channels to stem the online change rate, especially with millennials who are more likely to switch – more than twice as likely as other groups. Black stressed the importance of social media, stating that the bank looks closely at public sentiment in real time. She also noted that customers who have higher adoption rates for core banking products also have higher levels of satisfaction. The bank has tapped the example of hotels and guest preferences as a model to further enhance customer experience. She sees Bank of America continuing to capture more data faster and deliver innovative ways to make banking a lot easier for customers.

My overall takeway? Executives are more focused than ever on learning lessons about data and analytics from both inside and outside their industry. They share a common goal of improved regulatory compliance, revenue growth and better customer experience.

David M. Wallace is Global Financial Services Marketing Manager at SAS.