Big data analytics key for European bankers

21 November 2012

The ability to interrogate so-called ‘big data’ from traditional structured sources and unstructured sources such as video and social media is one of the key customer-facing technology priorities for European bankers in 2013, says a survey by the European Financial Management Association (Efma), sponsored by predictive analytics group Fair Isaac Corporation (Fico).

The results of the sixth Efma ‘European Credit Risk Survey’ indicate retail bankers’ risk management priorities for 2013. In the survey, which queried 70 credit risk professionals from 27 countries and 55 companies in September and October 2012, 61% of respondents said cross-selling products to existing customers will be a priority in 2013. Fifty-four percent said they will analyse big data to better understand customers’ needs and risk.

“In this risk-averse period, banks are looking for credit growth primarily from existing customers, on whom they have more data,” said Frans Labuschagne, general manager for FICO in Europe, the Middle East and Africa (EMEA). “But customers are risk-averse too, so banks need to really dig into customer needs to identify offers that might work. That’s where big data comes in - it’s a new resource that, if used wisely, can guide much more customer-centric offers and services.”

In the survey, 71%t of respondents said demonstrating a higher return on capital is a priority for next year, making this the top priority for 2013. The other highest priorities identified were using mobile channels (49%) and increasing capital to meet Basel requirements (just 40%, but 21% put it as their top priority).

On the risk front, at least 40% of respondents saw delinquencies rising in the next six months on mortgages, auto loans, credit cards, small business loans and overdrafts. “This represents an improvement on the prior survey, released in July, when these numbers were above 50%,” said Labuschagne. “For example, 44% of respondents forecast an increase in mortgage delinquencies, compared to 55% in the last survey.”

The biggest change in the credit demand and supply picture occurred in the so-called ‘credit gap’ between the percentages of respondents forecasting a rise in demand for credit versus a rise in supply. The credit gap forecast for small businesses fell sharply in this survey, to the lowest point this year, just 9 points.

The respondents forecasting an increase in volume of credit requested by small businesses fell from 37% to 35%, while those forecasting an increase in credit granted rose from 16% to 26% However, the credit gap forecast for consumer lending rose to a full 20 points. Now, 35% of respondents predict a rise in the amount of credit requested by consumer, compared with just 15% who predict the amount granted will rise.

“Governments continue to pressure lenders to expand credit to businesses, and recent programmes like the UK small business lending scheme announced by the Bank of England (BoE) should help,” added Patrick Desmarès, secretary general of Efma. “However, FICO and Efma believe lenders can and should do more to make capital available to small and medium-sized businesses, which can fuel economic growth and which continue to struggle to get credit.”

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