As banks and other businesses increasingly incorporate analytics in their operational strategies three concepts repeatedly crop up: prediction, speed, and personalization.
These, in turn, often relate to yet another term that's gained traction: customer centricity.
For example, Edwin van der Ouderaa, a senior executive with Accenture, recently had this to say in a podcast titled—pointedly—"Personalizing Customer Experiences with Predictive Analytics in Banking":
"The next generation of high-performance organizations will be the ones that can harness the real-time and predictive aspects of analytics and combine it with the user experience."
Gartner, speaking more broadly, relates analytics to the ability to recognize "business moments," which it defines as "a transient opportunity exploited dynamically that requires unprecedented business velocity and agility."
"As we are entering the digital world, businesses will need to digitalize business processes, invent new digital business models, and compete at the speed of business moments," it says in a recent report.
Clarifying somewhat, and bringing together the speed, prediction, and personalization aspects in one sentence, it goes on to say: "Senior IT managers and business process directors will increasingly be called on to manage an unprecedented degree and pace of business change, and to seize transient business moments by discovering what customers value and by personalizing processes to deliver that value—all in the same instant."
Transparency Market Research forecasts that the market for predictive analytics software will reach $6.5 billion globally by 2019. "The market growth is driven by increased demand for customer intelligence and fraud and security intelligence software. Cloud-hosted predictive analytics software solutions are seen as an emerging market and are expected to drive growth in the near future," the company says.
Speaking of security and fraud, Gartner says in another recent report that by 2016, 25% of large global companies will have adopted analytics solutions for at least one security or fraud detection use case, up from 8% today.
"Information needed to uncover security events loses value over time, and timely intelligent data analysis is critical as criminals and bad actors move much more quickly to commit their crimes," it says.
Getting back to banks and customers, Accenture's Van Der Ouderaa comments on revenue and retention and their relationship to analytics: "One of the main areas of using analytics is obviously in customer centricity, and that has to do with both understanding the customer better—as a group, as a subsegment, as an individual—but also how to service that customer better as a group, through the channels individually."
He estimates that now only about 10% of a bank's customers make up 50% of profitable revenue. "So if banks want to unlock further profit, they can do two things: They either try to upsell more to that 10% that they are already tapping into, or they should rather understand how to work on the 90%. So, customer centricity and analytics will in the future all be about how to understand what that 90% is, and unlock them. That will typically be done by tapping into social network data, other behavioral statistical data, and models for trends and styles and values and fashion, even, of those customer segments."
In a recent interview with ABA Banking Journal, Adam Anderson, chief technology officer, Q2—a digital banking provider whose virtual banking offerings are endorsed by the ABA—was asked about how predictive analytics fit in.
"They've proven to be a key difference in the area of omnichannel banking, which is, simply, being everywhere," he says. The key thing, Anderson continues, is to provide to the customer a unified user experience on whatever channel the customer chooses.
On the back end of that, banks need to provide a unified platform "within which the financial institution can learn about and understand their customers, service their needs, manage the security of their accounts and transaction, and really investigate how they use the digital channel," Anderson says.
A key point that Gartner makes in this regard is that too often business-decision makers depend on lagging indicators instead of leading indicators. According to its survey of 500 business and IT leaders at the end of 2013, while 71% claimed they knew the key performance indicators critical to supporting business strategies, only 48% had metrics to understand how their work contributes to those indicators. Worse, says Samantha Searle, research analyst, "They persist in using historical measures and consequently miss the opportunity to either capture a business moment that would increase profit or intervene to prevent an unforeseen event, resulting in a decrease in profit."
All of which gets back to what today's and tomorrow's analytics technology can promise: speed, prediction, and personalization. Says Anderson: "To the extent that the digital channel represents the lion's share of the interaction between the end user and the financial institution, having that understanding and that visibility from [a] unified platform is a key aspect of being in a position to provide the best possible experience."
Note: ABA, through its subsidiary the Corporation for American Banking, endorses Q2's virtual banking platform that connects banks to their account holders, who expect and appreciate a unified banking experience that enables engagement anytime, anywhere, via any device. For more information go to http://www.aba.com/Products/Endorsed/Pages/virtual-banking.aspx.]
Sources used in this article include:
Personalizing Customer Experiences with Predictive Analytics in Banking Podcast Transcript
By 2016, 25 Percent of Large Global Companies Will Have Adopted Big Data Analytics For At Least One Security or Fraud Detection Use Case
Gartner Says Organizations Using Predictive Business Performance Metrics Will Increase Their Profitability 20 Percent by 2017
Predictive Analytics Market to Reach USD 6,546.4 Million by 2019, Globally: Transparency Market Research