Uses of analytics in finance
- 2. BUSINESS ANALYTICS It refers to the skills, technologies and practices which is used for continuous iterative exploration and investigation of past business performance to gain insight and drive business planning. Business analytics focuses on developing new insights and understanding of business performance based on data and statistical methods. It also focuses on using a consistent set of metrics to both measure past performance and guide business planning, which is also based on data and statistical methods.
- 3. BANKING AND FINANCE Banking and Finance explores the dynamic, fast-paced world of money, shares, credit and investments. Finance is an essential part of our economy as it provides the liquidity in terms of money or assets required for individuals and businesses to invest for the future.
- 4. USES OF ANALYTICS IN BANKING AND FINANCE Technology has given rise to powerful business intelligence tools. These tools which the banking and finance industry can use to leverage customer data for insights that can lead to smarter management practices and better business decisions. There are various uses of business analytics in Banking and Finance which are discussed in the following slides.
- 5. • Improved Operational Efficiencies: In today’s ultra-competitive marketplace financial institutions need to be as lean and efficient as possible. Using BI solutions to analyze operational processes, organizations can reduce ongoing costs and maximize existing resources and expertise. For example, by analyzing the performance of customer-facing employees, such as sales personnel, tellers, and account managers, organizations can discover ways to improve and enhance the customer experience at the point-of-contact.
- 6. • Improved Products and Services: BI solutions allow organizations to track individual revenue streams to better determine which products and services are profitable and which are not. But the benefits don’t stop there. Business Intelligence solutions also enable financial organizations to analyze vast amounts of customer data to gain insights about customer needs and sentiments regarding banking that can be used to improve products and services. As an example, perhaps it is learned that customers want a quicker, easier way to track and analyze their earning and spending patterns. Institutions, may be able to send more timely alerts to customers. Or they are looking for a smoother and less complicated application and funding process. Armed with these kinds of insights, organizations can develop new and improved financial products and services to better meet customer needs, and in turn create a competitive edge.
- 7. Improved Marketing: Using BI, marketers can analyze CRM data based on a range of criteria to uncover the most profitable customer profile. In addition, the customer base can be analyzed to identify and develop new cross-sell and up-sell opportunities, and to carry out more targeted online marketing campaigns. This presents a major advantage, as research shows that it costs five times more to sell financial products and services to new customers than to existing customers.
- 8. Improved Customer Retention: As previously discussed, BI applications can help financial institutions identify and pursue those customers that are the most profitable. BI also plays an important role in improving customer retention and loyalty. Using business analytics tools and techniques, organizations can discover the reasons why customers switch to a competing institution. They can then implement new processes to help reduce customer churn. The ability to track customer habits, preferences and behaviors also allows organizations to tailor their products and services in ways that meet needs, solve problems, and promote customer retention and loyalty.
- 9. Developing New Investment Strategies: Asset managers are utilizing new data sets to develop new strategies for investing. By developing models around social media, investors can gain specific insight on sentiment and develop trading signals. Other research analysts are using satellite imagery to understand global supply of commodities like oil & gas or triangulating consumer spend based on the number of cars in shopping center parking lots. Whole new categories of investing are emerging from leveraging analytics and BI applications.
- 10. • Risk Reduction: The financial world is constantly changing and filled with uncertainty. More than ever, banking and finance institutions need to use every tool at their disposal to reduce risk. Fortunately, today’s Business Intelligence solutions provide actionable information that organizations can use to mitigate risk in several areas. The ability to track customer transaction histories allows institutions to quickly detect and reduce the incidents of fraudulent activities, the most notable being credit card fraud. The ability to track the communications and behavior of internal employees in trading securities helps institutions comply with new regulation frameworks brought on by the 2008 financial crisis and recent insider trading cases. Unlocking data from siloed asset class systems could help global banks predict credit risk for counterparties across all asset classes.
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