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Banking Analytics: Transforming Business Operations in the Banking Sector

Today’s customers have become digitally empowered and that is why there is a need for the banking industry to harness the power of customer data with banking analytics. Banking analytics should be the part of every major initiative in the banking industry ranging from customer engagement, retention, to finance and workforce. Also, to harness both external and internal data banks need to leverage banking analytics.

Banking analytics helps a financial institution to be more efficient about the way it goes about targeting its customers, and therefore, be more customer-friendly.

Furthermore, analytics in banking can help banking firms in operational improvement, cost-cutting, and customer experience improvement. In this article, we have curated a list of a few benefits of banking analytics that can help banking firms to measure customer and product profitability, identify high-potential prospects and customers and improve the ability to target products and services to prospects or customers.

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Benefits of Banking Analytics

Customer acquisition & retention

Banking analytics can help companies to identify high-value customer segments that are most likely to respond. This can further help in expanding the customer base by acquiring the right type of customer. By leveraging analytics solutions, banks can predict which business action will them earn loyalty of their customers. Banking analytics aggregates customer data and offers an in-depth insight into each customer’s behavior. This can further help banking organizations to quickly determine which segments are the most appropriate to target for different products and services. As a result, banking firms can improve relationship with their customers leading to improved customer acquisition and retention.

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Fraud Detection

For banking and financial firms across the globe, digitization has paved the way for fraudulent activities.  This has made it important for banks to have intelligent systems and tools to deal with fraudulent activities. By leveraging analytics in banking, banks can easily recognize frauds and analyze the suspicious activities in real-time. Analytics solutions that includes data integration and machine learning techniques can help banks to detect fraud by following a pattern through analytics dashboards. Implementing banking analytics can help automate such findings making fraud monitoring more effective and accurate.

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Cross-selling

Banking analytics can also be helpful in cross-selling of products. This can be done by analyzing the existing customer behavior and their interests for particular products. By compiling data with the help of banking analytics solutions, banking firms can gain valuable insights and determine where to focus their marketing efforts and which segments to target through marketing campaigns. Also, by leveraging banking analytics, banks and other financial institutions can personalize their communications with customers and offer  relevant banking products and services leading to revenue growth.

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customer analytics in retail

4 Ways Banking Analytics is Transforming the Banking Industry

The application of big data in banking can help companies to harness siloed data and offer personalized banking solutions to customers to drive profitability.

With the advent of big data analytics, the banking sector is focusing more on responding to the expectations of customers in real-time. Today companies in the banking industry are adopting to latest technologies to offer best services to their customers and stay ahead of the curve. By leveraging banking analytics solutions, companies are now able to digitize their core business operations and analyze their organizational structures. Consequently, digital technologies and new delivery platforms have become very important to drive organization performance. Companies in the banking sector are now focusing on integrating their payment methods, re-configuring delivery channels, and applying advanced analytics in banking operations. All these have paved the way for massive transformation in the banking industry. In this article, our team of analytics experts has discussed a few important ways in which banking analytics is helping the banking sector to design targeted marketing campaigns, manage risks efficiently and remain profitable and improve profitability.

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banking analyticsHow is banking analytics transforming the banking industry?

Through risk management

Banking analytics solutions can provide actionable insights into transactions and customer behavior patterns. This can not only help businesses to avoid potential risks but also offers detailed insights into factors affecting profitability. Also, using big data analytics, companies can analyze regional data of their customers and also the historic sales data. Furthermore, this can help them to determine the market trends and design their strategy to sell their services. Additionally, with the help of advanced analytics in banking, companies in this sector can analyze the factors that cause borrowers to default on loans.

By automating marketing and sales processes

Banks can leverage banking analytics solutions to analyze the sheer volumes of customer data to better understand their customers. This can help them to understand the needs and demands of customers and addresses them proactively. Also, by utilizing big data analytics in banking, banks can automate the sales and marketing processes. Consequently, the right products can be marketed to the customers at the right time and through the right channel.

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By guiding the product innovation phase through performance analysis

Banks can use banking analytics solutions to gauge the performance of the business as well as employees. This can help to design new products and offerings based on the current demand of customers. Also, this can help them to train their employees for peak times and achieve the target in the real-time. Banking analytics can also be utilized by banks to understand the nature of products required by customers and make offerings accordingly.

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By providing useful insights through analytics dashboards

Companies in the banking industry can use banking analytics dashboards to visualize customers data in real-time through graphs, charts, and customizable interfaces. Such data can be further used to run queries and analyze the type of loans, quality of assets and monthly profit from the business operations. Managers can run queries and pull reports based on their needs. They can analyze the percentage of loans by type, monthly operating expenses or profit and loss by region.

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Is Customer Analytics the New Kingpin for Banking Services Companies?

For modern banking services providers, understanding the customers is the foundation for a sustainable competitive advantage. The internal and external data sources available to banking services companies can be great sources for guiding product development, customer communication, innovation, and growth. This data can be further meticulously analyzed using advanced capabilities such as customer analytics through which banking services companies can get to know their customer at a more granular level. Furthermore, it can help in effective customer segmentation that reveals specific intelligence that could otherwise be obscured by the sheer volume of data. These insights aid banking services companies identify messaging strategies for marketing and customer service strategies and also gain a better understanding of the customer lifecycle and predict customer behavior.

Why is customer analytics important in banking services?

It is high time for banking services companies to up their game in customer analytics. Here’s why:

Analytics is the new normal

 As a result of low-interest rates, moderate fee revenue, onerous regulation, and a less than robust economy, the banking services providers are expected to remain revenue challenged for the foreseeable future. So, it will be more important than ever for banking services providers and credit unions to focus on all possible strategies that would help them reduce costs and increase revenues. Some of these strategies that can be achieved by customer analytics include:

  • Better management (and measurement) of sales leads across channels
  • Inclusion of custom customer incentives/rewards to influence behavior
  • Improved targeting of customer segments
  • Moving from a product focus to a customer focus 

Achieve customer centricity

Customer delivery and communication channels are expanding. This means that more customers interacting with their financial providers and banking services companies are using online and mobile channels, making it easier to gain insights into real-time sales and services. Analytics can respond to this rapid migration to digital channels by:

  • Integrating sales and service tools within a new digital environment
  • Improving branch efficiency and effectiveness
  • Helping to drive high value, high touch traffic back to branches

Technological changes

Customer analytics is no longer a domain that can be used and accessed solely by highly skilled specialists. Today, these solutions can be easily accessed and used by marketers and other business users to answer complex inquiries. Improvements include:

  • Increased number of specialized vendor solutions and expanded talent
  • Collapsing of product silos and ability to process increased data sources
  • Cloud-based solutions

Establishing analytics as a true business discipline can help banking services prContact USoviders to grasp the enormous potential. Get in touch with us to know how we can help banking sector clients in establishing a customer analytics program to suit their organizational requirements.

How can customer analytics help banking services?

We at Quantzig have identified six levers that make customer analytics a core component for banking services companies to consider:

Customer Insights

Most financial marketers are highly interested in the ability to gain a better insight on current customers. Demographics and current product ownership form the foundation of customer insight. However, behavioral and attitudinal insights are gaining in importance as channel selection and product use have become more differentiated. Take the instance of sentiment analysis and social media analysis that are helping companies analyze in-depth about their customer emotions on social platforms. Furthermore, scoring models such as FICO is especially useful for banking services companies to analyze consumers’ credit history, loan or credit applications, and other data to assess whether the consumer are likely to meet their payment obligations on time in the future.

Business strategy

Customer analytics proves to be highly useful in banking services companies for product and channel development as well as economic forecasting, business improvements, risk analysis, and financial modeling.

Managing customer experience

Using customer analytics for customer experience management (CEM) helps banking services providers in delivering personalized, contextual interactions that will assist customers with their daily financial needs. Moreover, if done correctly, customer analytics enables the real-time delivery of product or service offerings at the right time, thereby ensuring a better customer experience.

Risk management

One of the more common uses of ‘big data’ today especially for banking services companies is in the area of risk and fraud management. The applications of data mining have expanded well beyond providing internal purchase and balanced insights. It now even includes transaction patterns and social media interactions that can provide a leading indicator of potential losses or fraud. The integration of structured and unstructured data in banking services can also be leveraged for traditional risk management including pricing decisions.

Marketing

Another traditional use of customer analytics in financial services is the ability to increase the effectiveness and efficiency of sales and marketing. The ability to derive insights on the likelihood of purchase based on the available information on individual customers has ushered in a seismic shift in marketing from product centricity to customer centricity. Banking services companies and credit unions are now able to make unique, timely, and relevant offers based on available customer insight rather than offering products and services based on what the financial institution would like to sell. This allows banking services providers and financial marketers to significantly improve the efficiency of marketing spending and the close rate of sales leads.

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Implementing customer analytics for banking services

The future is already here. The only drawback is that it is not evenly distributed. Banks services and companies in every other industry are already deploying advanced analytics to move their businesses forward. Quantzig has identified that almost every top bank lists advanced analytics among its top five priorities. Most plan to invest further in these techniques. A few banking services companies are already seeing the rewards. By establishing data lakes and centers of excellence and using machine-learning techniques these leaders have already built substantial foundations for their business.

 How do you know what analytics capabilities to invest in for your business? All you need is an analytics expert that can guide you on leveraging the available data by avoiding pitfalls in banking services and accessing the broad set of opportunities. At Quantzig, we understand these needs of our clients and are committed to helping them bolster their analytics capabilities. Request a demo to know more about our analytics solutions.

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Advanced Analytics for a Leading Banking Sector: A Quantzig Success Study

What the Client Wanted

A leading banking sector client wanted to build an effective customer’s payment gateway and allow teams of users to quickly identify themes, trends, and look at individual customer activity.

The Outcome

The client utilized the power of the centralized database to test the effectiveness of the payment control environment and identified the weaknesses across the banking sector.

Global Banking Sector Overview

The largest banking sector corporations in the world have significantly enhanced their capital position over the years since the global crisis. While there is an enduring debate in some corners that banking sector players are still not satisfactorily capitalized, it is certain that the dangerously thin buffers of the pre-crisis era are gone. Additionally, most banking sector corporations have resolved the majority of the legacy conduct issues. Moreover, mitigation expenses are falling and Request Proposalwhile banking sector corporations continue to reshape their footprints, players are signaling that the associated restructuring costs will shortly peak.

Banking Sector Challenges

Macroeconomic risks: For banking sector players, uncertainties in the macroeconomic setting together with persistent and high levels of debt across corporate, sovereign, and consumer sectors lay the groundwork for asset bubbles to burst in the event of instability.

Technology risks: Failure to capitalize appropriately in secure, agile systems that improve digital and mobile banking can result in significant damage for players in the banking sector while compounding the menace for cyber-attacks.

About the Client

An American multinational financial services corporation and investment bank headquartered in the United States. 

Client’s Challenge

The company wanted to make use of financial crime and advanced analytics to better quantify and categorize their risk exposure, assess the effectiveness of their financial crime programs, and detect and deter criminal behavior. Additionally, the banking sector client wanted to build an Request Solution Demoeffective customer’s payment gateway and allow teams of users to quickly identify themes, trends, and look at individual customer activity.

Summary of our advanced analytics engagement

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Business Impact

With the help of Quantzig’s advanced analytics, the banking sector client optimized their database for certain predefined searches by the customer, by value, and by country. The client also understood the flows down specific corridors and in certain currencies. Furthermore, the client gained a deeper understanding of their customer activity across the world with the help of Quantzig’s advanced analytics. This helped them utilize the power of the centralized database to test the effectiveness of the payment control environment and identify any weaknesses across the industry.

Advanced Analytics Solution Insights

Quantzig’s advanced analytics helps banking sector clients make improvements out of almost all their activities; thereby, enhancing the traditional P&L levers. Advanced analytics also directly improves the demand capacity management of a company by allowing real-time insights into the demand/capacity curve. Additionally, as advanced analytics eliminate problems from the supply chain, banking sector customers can enjoy more reliable and consistent delivery times and service quality.

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Customer Analytics Engagement: Empowering a Leading Internet Banking Services Provider to Enhance Service Efficiency

What the Client Wanted

Identify drivers of customer churn and build a churn propensity model to retain potential customers and enhance service efficiency.

The Outcome

With the help of Quantzig’s customer analytics engagement, the internet banking services provider was able to analyze and predict complex customer behavior. Also, the banking analytics solution helped them improve every aspect of their business by developing new and proactive business models.

Summary of the Internet Banking Services Industry

In today’s fast-paced business milieu, on-demand internet banking solutions have become a necessity for a better lifestyle. That is what an internet banking services firm helps ensure. It offers complete control over the funds in your bank account. In fact, many organizations and individuals are now bidding-adieu to long queues and are opting for internet banking solutions. Internet banking has made it possible for the customers to access banking services at their fingertips.

Though the scope of internet banking is growing on a daily basis, customers tend to get apprehensive when it comes to data security- mainly because security breaches pose a major challenge for internet banking services providers. It is essential for banking service providers to employRequest Proposal robust security measures and encryption mechanisms to prevent the loss of customer data. Also, there are other major challenges that banks will have to reconcile in order to succeed, including transaction difficulties, technical issues, and traditional banking preferences.  

Industry Challenges

  • The issues arising due to technical glitches: Since internet banking service providers rely heavily on online platforms, a minor bug or a system crash could lead to substantial losses. This makes it necessary for internet banking service providers to ensure the smooth operation of their online platforms as the loss of data and funds due to a technical glitch may at times be irreplaceable.
  • Difficulties in online transactions: Depositing or withdrawing money from internet banking platforms can be more time consuming and difficult when compared with the traditional banking system. This is mainly because internet banking service providers often have significantly fewer ATM’s than their traditional counterparts, making it a difficult and time-consuming process.

About the Client

A leading banking services firm.

Client’s Challenge

To identify the key performance metrics, the client – a leading internet banking services firm  – approached Quantzig to leverage customer analytics and gain insights into customers’ behavior. The client wanted to reduce churn and focus on developing a churn propensity model with the help of our banking analytics solution. Furthermore, the client wanted to leverage banking analytics to devise effective churn reduction strategies as a part of their business plan.

Summary of our customer analytics engagement

Internet Banking

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Business Impact

With the help of Quantzig’s customer analytics solution, the internet banking services client was able to span the entire journey of their customers and identify multiple opportunities to drive the top line. The internet banking analytics solution helped the firm to decrease churn rate by 25-30% by using key intervention at the appropriate time. Additionally, our team seamlessly integrated data across several marketing channels that helped drive business value.

Banking Analytics Solution Insights

Quantzig’s banking analytics solution helps banking firms to accurately predict customer behavior and build churn reduction models to drive growth. Moreover, by establishing banking analytics as a factual business discipline, banking service companies can grasp the massive potential, which would otherwise be an uphill task.

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Retail analytics

Retail Banking Sector market analysis – How marketing mix optimization solutions helped a retail banking firm to find optimize the marketing mix

Marketing Mix Optimization for Retail Banking ClientQuantzig, a global analytics services provider, has recently completed their latest marketing mix optimization solution for a retail banking firm. The retail banking sector is under tremendous pressure to develop digital and data processing capabilities in order to simplify their business processes. Additionally, the companies in retail banking also need to cater to the growing needs of the customer about transactional accounts, personal loans, credit and debit cards, and mortgages.

“The marketing mix optimization solution offered by Quantzig assisted the retail banking client to accurately monitor, forecast, and periodically assess the impact of marketing campaigns on their market performance.” says an industry expert from Quantzig.

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The marketing mix optimization solution focused on quantifying the impact of marketing decisions of the past and forecasting future sales. By factoring in the impact of various media channels, the client was able to allocate marketing resources to form an optimal marketing mix optimally.

Additional Benefits of the Marketing Mix Optimization Solution

  • Evaluate the impact of different components of marketing plans
  • Understand the trends in the specific industry and pricing differences across sales regions
  • Develop robust marketing models to improve top-line revenue and ROI continuously
  • To know more, request a free proposal

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Top Challenges Hindering the Growth of the Online Banking Sector

The emergence of online banking has made offering banking services that much more comfortable. It has provided speed and convenience to the customers. Long gone are those days where customers had to drive to the banks and stay in the queue just to check their account balance or make deposits. Today, the same work can be done in the comfort of their home with just a few clicks. It comes as no surprise that  51% of US adults participate in online banking. Although online banking simplifies trading and provides convenience to both banks and the consumers, there are some distinct challenges and issues in the online banking sector. The problems can range from technical factors to habitual factors. Banks aspiring to drive the adoption rates of online banking should be well aware of suchFree demo issues.

Challenges in the online banking sector

Traditional banking habits

As mentioned earlier, 51% of US adults participate in online banking, however, on the hindsight, 49% of them still don’t. A majority of such people are susceptible to change and are well versed in traditional banking. Such aversion to change is usually due to lack of trust in the online system or the inability to operate online portals. As a result, banks are struggling to convince people to adopt online banking. In this case, banks can simply demonstrate the benefits of online banking and drawbacks of traditional banking to their customers.

Security and fraud instances

Security and protection against fraud and hacking are one of the most significant challenges for banks promoting online banking. In traditional banking, robbers would have to break into the bank to steal money from customers. However, skilled hackers can crack banks security measures to get customers detail and illicitly transfer money. For instance, almost 130 million British pounds were stolen from online bank accounts in 2015 through fraud. Additionally, the expansion of e-commerce provides an opportunity for fraudsters to misuse payment networks and steal sensitive information.

Cross-border transactions

One of the critical success factors of online banking is the implementation of the cross-border transaction as they play a vital role in the global trade. However, historically, cross-border payments have been slow, inefficient, and expensive. This is because most of the banks still use traditional infrastructure including national banking infrastructure which results in non-uniform development and software platforms that complicate cross-border transaction. New technologies including blockchain have been promising in overcoming such drawbacks to facilitate smooth cross-border transactions.

Technical issues

Banks are heavily reliant on online platforms to perform operational task including cash transfers, transaction recording, and information storing. A single system crash or a bug in their code can cause millions of dollars in losses or can even cause the bank to shut down its operations temporarily. Similarly, customers can lose trust in online banking when it’s not functional for that time. So banks face challenges in not only running their online platforms smoothly but also look towards their mobile apps.

Multi-currency and payment methods

The rise of global e-commerce has posed new problems in the online banking sector, that of using multiple currencies and payment methods. Consumers around the world use various payment methods including credit card, debit card, Paypal, bank transfers, e-wallets, mobile payments, and Sofortbanking. Merchants accept payments through such means and in different currencies. However, they face difficulty dealing with multi-currency, cross-border transaction, bank accounts, business entities, and regulatory hurdles. Such problems can usually be solved by selecting a payment service provider who can provide effective and immediate solutions to these problems.

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Types of Risks Looming in the Banking Industry

The banking industry is by far one of the largest industries in the world. In the US, insurance, real estate, and financial industry account for 20% of the total GDP. In order to keep the economy smoothly flowing, it is essential that banking industry operates seamlessly. However, the truth is that the banking sector is far from stable, as banks face numerous risks which threaten not only their profits but also the economic balance as a whole. As a result, it is essential that banks perform proper risk analysis and mitigate such perils for smooth operations. Keeping risks unchecked can lead the world towards financial meltdown as witnessed in the 2008 global crisis. So what are theFree demo kind of risks faced by the banks that needs to be regularly monitored?

Credit risks

Credit risk can be defined as a risk that a borrower or the counterparty will fail to meet their obligations by agreed terms. Such risks occur due to borrowers inability to pay back loans arising out of interbank transactions, trade financing, foreign exchange transactions, swaps, bonds, financial futures, options, guarantees, and the settlement of transactions. To simplify the matter, a $100 borrowed and not paid back will result in banks taking the loss in full. Additionally, banks will have to redress the money from their lenders who can be government, other banks, or the general public. Such losses in large amount can cause a serious dent in the economy. The banking industry usually declares the high rate of interest for borrowers who are associated with high credit risk. Banks need to perform timely risk analysis at an individual level to protect its wealth.

Market risks

“Mutual fund investments are subject to market risks.” You may have heard this statement a thousand times over in the banking industry. So what is a market risk? It is the risk that causes losses in the bank’s trading books due to changes in interest rates, credit spreads, equity prices, foreign-exchange rates, commodity prices, and other indicators. However, this type of risks only troubles players who are into investment banking space since they are active in the capital markets. Market risks are hard to assess as some factors are highly volatile like commodity prices, whereas some are stable, but small deviations can cause big consequences like interest rates. Proper risk analysis can be carried out by dividing it as per their potential cause, i.e., interest rate risk, equity risk, currency risk, and commodity risk.

Operational risk

Losses that could arise from failed or inadequate internal processes, people, and systems or from external events is termed as operational risk. It also includes legal risk but does not incorporate strategic or reputation risk. Humans are prone to making errors and mistakes, and such errors can occur in the banking industry due to improper operational risk analysis. Filling incorrect information while clearing a financial instrument can cause loss of time to rectify that error and in some cases loss of money due to improper crediting of balance. Apart from human risk, operational risk can also occur due to system risk or process risk.

Liquidity risk

Liquidity risk arises when banks perform inadequate risk analysis relating to marketability of an investment which cannot be sold quickly enough to prevent a loss. In simple terms, it is a risk that disables a bank from carrying out their day-to-day cash transactions. Even though it may seem like a theoretical example, it happened in Northen England when one of the bank was taken over by the government due to its inability to repay the investors during the 2008 global crisis.

Business risk

Businesses in the banking industry may be unable to meet its anticipated profit targets due to various reasons. Sometimes they may even incur a loss in place of making a profit. In case of banks and financial institution, missing the target can have severe implications as banks will have to shuffle their investment and public money. Business risk arises due to the failure of bank’s long-term strategy and errors in estimation and forecasting of profit metrics. A proper business risk management strategy can ensure sustainability even in the harshest economic environment. Conducting thorough risk analysis by guaranteeing flexibility and adaptability to the market condition can help banks avoid business risk.

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Advanced Analytics – A Wind of Change in the Banking Sector

Data is the fuel that propels the analytics solutions to generate relevant insights and predict future behavior. In that case, the banking industry is not deprived of data, with ATM machines, credit card processing, online transactions, and personal data churning out millions of data points every second. All such data were previously discarded or deemed unuseful. However, with the advancement in analytics capabilities, banks are using such information to uncover deeper insights. With increasing competition, new technologies such as blockchain, and looming economic instability, banks are under pressure to remain competitive and profitable without sacrificing on customer satisfaction. Although effective mining of insights has remained mostly vague in the banking industry, developments in advanced analytics and machine learning will undoubtedly re-shape the banking world. Apart from predictingFree demo customer behavior and improving risk assessment, advanced analytics can be widely used to assist decision maker to grow profits in the banking sector.

Putting a stop to anti-money laundering activities

Governments all across the world are being aggressive in their attempts to crack down on anti-money laundering (AML) activities. They have put forward AML compliance guidelines which should be followed by global and regional banks. Despite huge technology and process investments to achieve such compliance goals, the banking world is still falling short to meet these requirements resulting in million dollar fines. Today, banks all around the globe are using advanced analytics to stop the flow of such illicit funds. To ensure AML compliance, banks are using tools such as Customer Due Dilligence (CDD), Know Your Customer (KYC), social graph analysis, Transaction Monitoring Systems, behavioral modeling, and customer segmentation.

Realizing cross-selling and up-selling opportunities

Advanced analytics can be used to create a detailed profile of the customers and when coupled with transactional and trading analytics, acquisition and retention rates of the clients can be improved along with cross-selling and up-selling opportunities. With the help of predictive analytics, banks can seek out profitable customers, understand their needs, and estimate the results. Prediction models are built taking into consideration decision tree, time series, neural networks, and linear regression. Consequently, the correct product for cross-selling promotion is identified along with its optimal price point.

Digital banking and advanced analytics

Consumer expectations are growing at a rapid pace as they look for a seamless, high-quality experience across all digital channels. Financial institutions are delivering services through all possible digital mediums embedded with exciting features. It’s a win-win situation for both parties as banks can provide a much better customer experience at a fraction of the current cost. However, complications arise in the digital medium when customers start out in one channel, perform subsequent steps in other channel, and end up completing the transaction in a completely different one. As a result, banks and financial institutions are using advanced analytics to understand the customer and build a proper and consistent journey view to create a seamless multichannel experience.

Exploring growth and profit opportunities

The banking industry is continuously looking out for new growth and investment opportunities. Advanced analytics can help banks identify such opportunities and even recommend new business models. In the future, banks may partner with other industries to reap income from their data repositories. For instance, banks may be able to share customer-analytics capabilities with players in the telecom or retail industry to boost their operational efficiency. In May 2017, BBVA, a Spanish bank, officially announced its intention to launch open banking. The platform allows third parties such as retailers to use customer data to offer tailored products and services. For instance, a retailer could notify a customer when they can obtain a preapproved loan from BBVA which is accessible at the point of sale.

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