According to a 2013 analyst report, the banking sector ranked second, behind media & communications, in terms of Big Data investments. The report estimated that 34% of banks were already invested, while an additional 24% expected to do so in the near term.
The conviction is justified given that data has for long been a key value driver in banking. Big Data technologies have the potential to further enhance that value as banks navigate a transformed landscape characterized by exploding data varieties and volumes.
But technology is only as valuable as the outcomes it empowers. And 2014 will be the year when banks fully apply the buzz of Big Data technologies to the business of delivering competitive and profitable outcomes.
Enhancing customer experience, engagement, intimacy and loyalty is a critical component of banks’ competitive strategy. But customer expectations from each of these practices can be quite divergent. With Big Data, banks will be able to go beyond traditional segmentation models to group customers by shared expectations, preferences and needs. This more granular approach to segmentation will open up new possibilities in individualizing personalization and therefore, experience.
Big Data-powered data-driven business models also empower banks to look beyond traditional datasets and build customer profiles that are about individual lifestyles rather than transactions. Delivering personalized offers around these lifestyle needs will not only enhance experience and build engagement but also engender loyalty.
But even as Big Data enables banks to unlock new customer value, it also creates the capabilities to drive stronger risk management processes. It helps banks to harness insights buried in unstructured data and activity patterns to generate risk assessment and fraud detection models that deliver more robust results. These techniques can even help identify customers who are actually bank-worthy but until now have fallen outside the ambit of credit scoring models.
However, the biggest challenge for banks on the road to analytics-driven business value is talent. According to one analyst estimate, by 2015, the shortage of data and analytics talent will be two-thirds that of actual demand. Banks should institute structures and processes that generate the necessary skills so that they can move from Big Data hype to Big Data value.
Also read our blog on the Compliance as a banking trends