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 Chuck Schaeffer How Financial Services Leaders Are Succeeding with Big Data

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Banking, Insurance & Capital Market Big Data Strategies and Best Practices

When I discuss Financial Services strategy design I often comment that Business Intelligence (BI) is one of the few sustainable competitive advantages available in banking, insurance and capital markets.

Getting the right information to the right decision maker at the right time is not easy, and therefore not easily replicable by competitors. Further, the ability to apply Business intelligence to make better business decisions is something that never deteriorates in value. The most recent research from the IBM Institute of Business Value demonstrates the correlation among companies with mature analytics capabilities and the most profitable companies.

Analytics Correlation with Profits
Source: IBM Institute for Business Value

However, the distance between financial services leaders and laggards is large and the journey to better decision making is a complex undertaking.

Financial Services Institutions (FSIs) accumulate large volumes of data. However, that data normally languishes in disparate applications and data siloes, making it plentiful but difficult to harvest – and making the FSI data rich but information poor.

This data utilization problem is exacerbating. 80 percent of the world's data is unstructured, and unstructured data is growing 15 times faster than structured data. Financial services firms struggle to harness, apply and benefit from unstructured data types such as audio (IVR, call center recordings, mobile, VoIP), video (YouTube, news, online presentations, screen sharing), images (Instagram, Pinterest), websites (e-commerce, Chat, subscriptions), geo-spatial, text (SMS, emails, research reports) and social media (blogs and social networks).

Data Types

With no physical products to manufacture, data is to banking and financial market companies what raw materials are to manufacturers ― the basis for the production of financial products. But data is more than just the raw material which converts to information. Data is the foundation for financial services learning, insights and decision making; it is the source for FSIs to create superior financial products, services and customer relationships; and it is the basis for banks, insurance companies and capital market companies to find differentiation in an increasingly crowded marketplace.

While financial services executives recognize that Information is the basis of competition and competitive advantage, their ability to internalize information into daily decision making remains an elusive goal. Even seemingly simple information such as knowing who your customer really is, what he or she really wants, and what you need to do to delight them for a mutually rewarding and profitable customer relationship is an easily understood imperative that remains out of reach for FSIs who are unable to acquire the right data, route data to where it can be applied or make data actionable.

What's the Big Idea?

In my work with IBM, I've found Big Blue's positioning of big data as the next great natural resource particularly insightful. Data is to the 21st century what steam was to the 18th century, what electricity was for the 19th century, and what hydrocarbons were for the 20th century.

Big data is defined by the three characteristics of volume (the growth and run rate of data), variety (the types of data) and velocity (the speed at which data cycles). Because of its constructs it cannot be leveraged using traditional BI processes and tools, as these tools cannot handle the volumes or variety of data which now include raw, structured, semi-structured and unstructured data that often cannot be put on your own servers.

Big data is unbound data, compared with traditional data for analytics which is cleansed, staged, normalized, appended to a defined data schema and then placed into a data warehouse where it becomes accessible within fixed parameters. A big data benefit is that by preserving the data fidelity, you keep data management costs lower and facilitate new data exploration with vast amounts of data for discovery and new business insights. What I personally find exciting about Big Data is that it enables forward thinking business leaders to find answers to questions they didn't know to ask, thereby discovering new insights and new business opportunities that can grow financial service businesses exponentially, not incrementally.

When data can be viewed, queried and analyzed from across internal legacy systems and external data sources as a single data set, FSIs can identify patterns, detect trends and uncover insights that otherwise remain undetectable. These insights are providing big data analytics adopters with competitive advantages in areas such as customer acquisitions, customer share, customer retention and customer lifetime value.

But keep in mind that adding more data to already more data than can be sufficiently managed will not add value. Business value is obtained by making sense of the data. Making big data successful means knowing how to apply algorithms, data maturation processes or know-how in order to turn higher volumes and varieties of data into more confident business decisions.

To make sense of the big data opportunity, I'll share some practical examples of how this technology can aid long standing financial services challenges. An often cited but seldom realized goal is the achieving the 360 degree customer view. Big data can help realize this strategic imperative.

Next: Achieving a 360 Degree Customer View >>

Financial Services Big Data360 Degree Customer View360 Degree View Data TypesSocial Customer DataBig Data For SalesBig Data For MarketingBig Data For Customer Service

 

 

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Data is more than just the raw material which converts to information. Data is the foundation for financial services learning, insights and decision making; it is the source to create superior financial products, services and customer relationships; and it is the basis for banks, insurance companies and capital market companies to find differentiation in an increasingly crowded marketplace.

 

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