How to Pinpoint the Right Advanced Analytics Solution for Your Financial Institution

By Steven Simpson | 27 July 2016

A tsunami. It’s a perfect metaphor to describe the massive amount of unstructured and structured data financial institutions (FIs) receive and store each day. 

Every single minute, data is arriving from various sources; from mobile and Internet banking transactions, social media content, emails, account-holder history, customer reviews, internal processes, and so on. Using sophisticated algorithms and statistical models to evaluate trends, predict customer needs and purchasing behaviors is a mighty task for FIs across the globe. Though, FIs know that within the vast amounts of data lie insights that can be extremely beneficial and profitable.

Data is the lifeblood for FIs. That’s why it is important to understand how to transform this data into actionable advanced analytics that will improve profitability, retention, customer experiences, and operational efficiency. To do so, many FIs are turning to data talent, specialised software and service providers for help to transform this tsunami of information into data driven decisions.

Sifting through the tools, options and providers is a daunting task. Should the FI adopt an open source or cloud-based business intelligence software? Is recruiting and hiring statisticians and data analysis a better option? Will implementing an end-to-end third party solution generate the results and support the FI needs?   

What’s the right path for your FI?  Here’s a quick list of options, how they work and considerations along the way:

​1. Adopting Business Intelligence Software:  

As FIs embark on the next frontier of innovation, many are adopting a data analytics and reporting solution from major business intelligence providers such as IBM, SAS and Accenture to manage and report on all the granular details of customer data and transactions. Data lake is replacing data warehouse and is a technological leap that bankers should understand and consider. Open source business intelligence is also becoming a common alternative to traditional business intelligence software. 

Many of these leading-edge advanced analytics software providers specialise in offering dynamic dashboards, powerful report building and modeling that help FIs to solve challenging business problems while unearthing non-intuitive business decisions through machine learning.  

On the flip side, it takes keenly specialised software that is constantly evolving to be able to make sense of all the FI’s data in a useful way. And, someone internally needs to manage the software, interpret the results, provide the reporting, then measure and track the actions.

Many FIs base their software buying decisions on budget and features. However, the decision should be based on the FIs overall strategy and which software tools will produce the types of analyses the FI deems critical. Also, consider if your FI has a strong development team who can write code within the software. One of the biggest challenges FIs face with BI software or open source solutions is hiring, training and retaining talent. These specialists typically want to work for more high-tech employers using the latest tools versus a community or regional bank environment. The time commitment can pose another challenge. In many cases, it takes a FI up to 2-3 years for a complete implementation.

2. Hiring a Data Scientist, Statisticians and Data Analysts:

In 2014, Wells Fargo, the world’s largest bank, hired their first chief data officer and allotted a budget of $100 million to a team of 600 dedicated to refining customer data into actionable models. Their goal? Make data actionable— and the bank more profitable.

Not all FIs have a $100 million budget to expand their workforce and hire a PhD to sift through mountains of data. But forward-thinking FIs need data scientists who can crunch, organise and make sense of all the petabytes of banking data. An experienced data scientist will analyse your data each day, and can train your staff to uncover new opportunities, reduce expenses, retain customers and create new revenue streams. Data scientists can create algorithms that can basically forecast the future and advise your decision-makers to take action on immediate opportunities to drive efforts around fraud detection and prevention, regulatory compliance and operational efficiency.

The flip side: For specialists with the tile "Data Scientist" tied to their name, the average salary is $120,000, according to Glassdoor.com. Other considerations are the time and expense to recruit, hire and even retain these specialists.  Plus, many fly the coop for positions with larger FIs that offer an even bigger pay check. Even with the data imperative happening at Wells Fargo, it could take years to actually see results.

3. Third Party Outsourcing- An End-to-End Solution:

If you don’t want to invest in BI software, hire a data scientist or develop software and data-talent internally, you can outsource an end-to-end solution. The top benefit of working with an outside advanced analytics provider is speed.  For some FIs developing an advanced analytics program, an in-house team is just unrealistic. Many FIs that are searching for a turnkey analytics system that leverages a multi-year, proven big data product, look to an outside provider. Since these firms are developing software and customised features for countless organisations and FIs, they have deep experience and can be more flexible, affordable and easier to implement than traditional BI software.  

Make sure your provider can ingest internal data from multiple sources (such as core, risk management and loan origination platforms and even Excel). Inquire if they can handle both structured and unstructured data, and fill data gaps with algorithm results or external data. Third-party providers can create customizable dashboards, filters and dials to meet your FIs data insight needs. And, since you don’t have to hire expensive data scientists, many FIs that use an end-to-end solution are seeing increased revenue—at a fraction of the cost and implementation time (some providers like TruVantage take only 120 days to implement). Outside firms help remove old assumptions because now you have fresh eyes and insights reviewing the data—helping make better decisions and enforcing that you take actions on those uncovered opportunities.

The flip side: If going the route of an outsourced provider, due diligence is key. Do your research, get referrals and see a demonstration of the product. Find out if they have existing algorithms that will deliver immediate ROI, provide post implementation support and a data scientist on-hand to help throughout the process to answer questions. Even having a virtual data scientist available will help the FI’s management team clearly pinpoint action that can be tracked and repeated. Using a third-party provider is not a one-size-fits-all solution. Know upfront what your FI’s goals are around an advanced analytics program and make sure you select a proven leader that can do all the heavy lifting for you. After all, you need to focus on growth, earnings, customer service and beating the competition. Outside help is just that- help!

The Path Leading to The Summit

At the end of the day, FIs need to get on board with the advanced analytics imperative. The goal is to spend less time hiring, training, sifting and reporting; and more time exploring, interpreting and putting the data to action. We all want to achieve a quantifiable ROI that can be measured, tracked and repeated. When you have a system in place, that works, provides key insights and profitable action, the workplace culture is transformed. Management and sales are working together to achieve success because they believe in the reports that truly bring valuable opportunities. This leads to results, revenue and revitalising the FI’s process for turning that tsunami of data into profits.

By Steven D. Simpson, Senior Vice President, Saggezza.

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