DRIVING A COMPETITIVE ADVANTAGE IN THE FINANCIAL SERVICES INDUSTRY WITH DATA

Romain Picard, VP EMEA at Cloudera

 

There are no shortages of challenges to be faced when it comes to the financial services industry. Ranging from the maze of regulatory compliance such as potential reforms to GDPR, rising customer expectations and hot competition from new digital entrants such as Revolut that continue to grow. It goes to show that there is an urgent need for banks to be nimble and adaptable to truly overcome the obstacles they face. Failure to do so and financial institutions risk falling behind the competition, missing out on opportunities to grow and possibly even financial or reputational damage in the case of adhering to regulations.

However, as banks begin to find their bearings in this landscape, what appear to be insurmountable odds may in fact be opportunities for growth and differentiation. But how exactly do these financial institutions tap into this? The answer lies in becoming data-driven.

 

Tapping into new customers and markets 

A recent study by Accenture revealed that consumer trust in their banks is declining, even before COVID-19 hit. Despite this, banks have a real opportunity to win it back by truly adopting a customer centric approach that speaks to changes in customer behaviours post-pandemic. To achieve this, financial institutions need a data management platform that can keep pace with its digital transformation efforts and ensure they successfully meet customer needs. As part of this, the data platform needs to support a variety of data sources. This is to enable timely and relevant services to meet customer needs effectively, while also maintaining flexibility to adjust to evolving market developments. In doing so, financial institutions can drive business growth and make sure they are remaining ahead of the competition.

Romain Picard

Importantly, having the right access to data enables better informed decisions, such as what new markets to expand in and how to do so effectively. A great example of this is Bank Rakyat Indonesia (BRI). The bank discovered that 66% of Indonesia’s 275 million population are unbanked, and do not have access to financial products and services. With the objective of improving financial inclusion and addressing the needs of unbanked Indonesians, BRI saw a real opportunity to target this customer base. We worked with BRI to construct a five-layer IT architecture with AL and ML capabilities that allowed it to store, consolidate and process information from multiple data streams into a single platform. This resulted in more detailed analysis on customer transaction data, 40% fraud reduction and an improved credit scoring system. In turn, BRI was able to develop a new digital microfinancing product for customers that were formerly assumed too risky to be served.

As showcased by BRI, more precise business insights obtained from transaction data reveals previously untapped opportunities in the form of new customers and markets for banks.

 

Getting personal with customer experience 

In any successful growth strategy, customer retention goes hand-in-hand with customer acquisition. Now more than ever, customers are digitally engaging with their banks. In fact, two-thirds of banking customers say they would convert fully to a digital bank in the future. With this in mind, there is a new impetus for banks to create better digital customer experiences in order to attract and maintain customers that translates to long-term brand loyalty.

Data-driven insights are vital to nurturing individual customer relationships as it produces actionable insights that can be used to deliver a high quality and personalised service. For example, real-time data analytics can help augment a bank’s risk management and detect warning signs of potential repayment problems. In this manner, the bank can proactively assist customers and avoid defaults. It’s value-added interactions such as these that can help strengthen trust in the brand and ultimately loyalty.

 

Charging digital transformation

Moreover, in an industry where making informed decisions is vital, data-driven insights are crucial to driving successful digital transformation and retaining a competitive advantage. Businesses using data backed findings are more likely to make smarter, more informed decisions about its future. This is because data provides greater direction for a robust business strategy to be created that takes into account any risks and showcases ways to manage them. For example, this could include, deciding which new markets to expand into and how best to navigate this. With these sharper business insights, organisations can tap into new opportunities with more agility.

This data-driven nimbleness was one of the reasons that Bank Mandiri was able to navigate the effects of the pandemic. When lockdowns swept through Indonesia, Bank Mandiri needed to ensure that its systems could integrate data sources to generate insights efficiently while also supporting their teams working remotely. In response, the bank established the Enterprise Information & Decision Platform (EIDP) as a single source of truth running data integration on its data management platform. This also provided the foundation for the bank to build three dashboards in a day to address pandemic-related developments.

These dashboards informed decisions on whether to open or close branches as needed, ensuring that transactions could proceed with minimal disruption. With the platform affording more scalability and flexibility, Bank Mandiri was able to ramp up its daily data processing to ten million records each day. All whilst shortening the time it took to process data from seven days to a matter of hours. Having access to this data and real-time monitoring helped avoid a lack of visibility into the bank’s liquidity status, which could have resulted in estimated losses of USD 1 billion. Additionally, it also helped to prevent potential transaction losses of approximately USD 7.3 million per week at each of the bank’s branches. Without this data backed decision making, Bank Mandiri would have struggled to make effective decisions about the future of its operations.

 

Making a competitive advantage last 

Keeping a pace with new customers, new and old rivals and complex financial regulations, banking institutions demand a strategic use of the data available. Organisations who embrace transformation fuelled by data will develop the business agility and heightened competitiveness to excel in the years to come. Those that fail to adopt a data-driven approach risk making ill-informed decisions that harm both the future of the company and its relationship with its customers.

 

spot_img

Explore more