As the banking industry and wider economy emerge from the financial crisis, banks have been able to start shifting their focus from controlling the damage to actually growing their business. With customers starting to spend more, look for loans and weigh their financial options, banks are accelerating their moves to a customer-centric (rather than the traditional product- or channel-centric) model to both attract and retain new customers. But customer-centricity requires banks to truly understand their customers, and despite years of investment and effort most banks still can’t analyze data at the scale and speed to do that, says Rani Goel, senior director of analytics product marketing for SAP.
“There’s a lot more focus on data now. There’s more sophisticated analytics tools, and there’s so much more unstructured data than ever before. The problem is that banks’ legacy systems can’t handle all that unstructured data,” Goel explains.
Fewer than half (46%) of banks can analyze external data about customers, according to a survey of 100 banking executives SAP conducted last year in partnership with Bloomberg. Even fewer of those surveyed could analyze social media activity (32%) or their share of a customer’s wallet (29%), according to the study.
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The most common challenges cited by the respondents to achieving customer-centricity were data and analytics capabilities: 40% said that volume of data was a key obstacle, and 37% said the same about the complexity of analytics tools.
The respondents were confident in the value of emerging technologies to help them understand their data and achieve their organizations’ goals, Goel notes. More than half of the respondents said that technologies such as cloud (62%), predictive analytics (59%) and real-time data processing (55%) will be extremely valuable to their strategic objectives in the next two years.
But before banks can start leveraging these emerging technologies and their value, they have to build a foundation for data management and improving data quality, says Seth Rosensweig, managing director in AlixPartners’ information management services.
“I spoke at a conference last year about the Volcker Rule and pulling in data to the enterprise level for compliance. A lot of the questions from the audience were around technology, and what they could implement. I told everyone it’s not about technology yet. It’s about understanding your framework for data management,” he shares.
Banks need to be thinking about the hierarchies and taxonomies that they will use to identify and manage their data sets before they start to build the architecture for data and analytics to drive marketing and customer acquisition. Those that don’t track these issues and work through them before starting to layer new technologies on top of their existing infrastructure and will be at a disadvantage down the road, Rosensweig warns.
“Until banks can extract data from different systems and relate it to data throughout their organization, the true benefits of big data will remain elusive for them,” Teresa Epperson, a managing director at AlixPartners, agrees.