It’s no secret that the largest players in the banking industry are focused on making the right technology investments. In 2016, retail banks were expected to increase their technology investments by an estimated 40-50 percent, particularly in compliance, online banking, “bring-your-own-device” management and payment software. Digital analytics is no exception.
Retail banking, like any other services industry, lends itself perfectly to digital analytics as the industry seeks to continually improve customer service, ensure compliance, reduce operating costs and increase revenue for its business in 2017.
Banking especially is a reservoir of relevant data that can provide contextual information in near-real time. This data can be used to offer hyper-personalized services to customers (a.k.a. market of one), establish proactive communication channels with them and offer optimized transaction processing systems while monitoring for compliance issues.
This is particularly important as banks face increased competition and lower profit margins. Larger banks must contend with retailers like Walmart opening their own banking business as well as smaller digital banking players making waves in the market. In fact, Accenture estimates that 35 percent of banking revenues will be at risk by 2020, due to disruptions in the financial sector.
This process of digitalization will be more fruitful in this year once transformational banking systems are in place. Banks can use the data generated by digitalization to obtain strong analytics that give customer insights and build a competitive edge. 2017 could be a watershed year for digital analytics in which banks and consumers will see significant benefits from the process of digitalization. Banks must focus on customer concerns, customer engagement, security and regulatory compliance, in addition to economic efficiency.
Following are a few ways that digital analytics can help Banking, Financial Services and Insurance (BFSI) companies address some of their challenges in the market.
1. Capturing the growing millennial market
A large push within the BFSI sector’s digital analytics is catering to the growing millennial market — for good reason, as it is a group that in 2016 overtook baby boomers as America’s largest generation and is a digital-native group that is looking for digital services and convenience.
This market will be a huge target customer area, as the number topped 92 million in 2016 in the U.S. Banks are already working out different interaction models inspired by this potential customer base and will continue to mine digital behavior to further customize their services. Banks have a rich amount of data in how millennials prefer to manage their lifestyles, conduct basic banking services and plan their finances, with a focus on ease of banking, speed and security from banks.
Customer insights from digital transactions will help banks serve this group on-demand with instant, trusted, insightful and cost-effective services. Mobile/wearable channels will be key to providing these services effectively and will see significant growth in 2017.
This focus in 2017 will manifest in ads and services targeted at millennials, based on location data from past transactions, geolocation of mobile/wearables, predictive analytics and clickstream analysis. Banks can use this opportunity to connect better with their customers and aggressively upsell their products.
2. Big data becoming a given in the market
The year will see a continued maintenance in big data investments, especially as costs come down. Big data analytics sales are expected to reach $187 billion by 2019.
This certainly will be the case as big data becomes mainstream. We expect Hadoop and Spark to move from being batch-processing platforms for data science-driven use cases to running mission-critical jobs.
As big data becomes an integrated part of the banking business, we anticipate more big data workloads moving to the cloud, while many customers that traditionally run their operations on premises will move to a hybrid cloud or on-premises model. We can also expect to see organizations using the cloud not just for data storage but for data processing and analytics as well.
Data lakes and data science will be the basis for driving new markets, as banks will be able to predict customer behavior and offer hyper-personalized service and strong risk management; data analytics will help manage fraud detection, credit scoring, and compliance. This will become an intrinsic part of delivering integrated marketing analytics to the market of one at much lower cost than last year.
Organizations will respond by pursuing use case specific architecture design based on a host of factors including user personas, volumes, frequency of access, speed of data and level of drill-down or roll-up before committing to a data strategy.
As big data solutions move into mainstream critical applications, data governance, data quality and Master Data Management (MDM) around big data will become of paramount importance to ensure accuracy and traceability of data for advanced analytics as well as regulatory and compliance purposes.
3. Opening more digital channels
As banks offer more personalized services that meet customers where they are, we anticipate that digital analytics will open more revenue channels, with a more community-based approach to banking. We also anticipate that we’ll see banks focusing on the customer journey to identify further points of engagement.
Banks will use data analytics and artificial intelligence to power more interactions with customers. Three-way conversations between chatbots, agents and customers will become the norm with the additional benefit that bots provide the ability to do near real-time research and analysis with immediate feedback from customers.
They will also allow for predictive and prescriptive alerts via mobile/wearables, with the ability for customers to immediately respond and interact with the business.
To enable these, there will be increasingly widespread deployment of advanced analytics platforms and solutions like Mphasis IPs HyperGrafTM (Customer 360 analytics), InfraGrafTM (Infrastructure analytics) and DeepInsightsTM (Cognitive computing for deep analysis of data sources).
4. Digital analytics and compliance and security
Compliance and security will continue to be a major focus for banks, and an “American Banker” survey noted that over half of banking responses claimed that they were spending more on compliance and security technology in 2017.
This is particularly the case as banks balance new technology investments and new services with security. With digital analytics, many compliance processes can be automated to free resources. Banks, for example, are looking to the increased use of anti-money laundering solutions to perform mandatory due diligence on customers to ensure the proper use, source and destination of funds.
5. Embracing disruptive technologies
Part of the risk to revenue is disruptive technologies that may give an edge to smaller players, but we anticipate that digital analytics will help larger players embrace those technologies. For example, blockchain, the digital ledger that drives bitcoin, had been in previous years seen as a fringe payment alternative; but that may change soon. Because bitcoin can offer enhanced security, there’s potential usage for exchanges and transfers. In fact, some estimates point to 15 percent of big banks using blockchain by 2017, and we anticipate that this number will only increase. It is only in testing phases now.
We also think that digital analytics can fuel the overlay of chatbots and cognitive computing / natural language processing. This will become central to relationship building and transacting. Bots will significantly enhance the way banks engage with customers in numerous ways.
Above all, in 2017, banks will increasingly offer ways to simplify complex instruments; the role of an advisory becomes key in this. Banks will also use an integrated approach to use all relevant data to create contextual information in near-real time to provide the next best action.
Dinesh Venugopal is president of digital and strategic customers at Mphasis and a member of the Executive Council. He has over 15 years of leadership experience across technology innovation, marketing and M&A. In his current role, Dinesh focuses on strategies that help clients achieve high performance through solutions that bring together business, technology, operations and customer experience. Prior to Mphasis, he was head of product development at BMC Software and earlier was director of engineering at Marimba.