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Big Data will be banks’ next natural resource

The financial services sector all over the world is going through a time of unprecedented change. New players are entering the sector, financial institutions are consolidating and competition for customers — whether in retail, corporate or investment banking — is steadily and rapidly increasing.

Ahmed Auda says insights from Big Data are unparalleled.

Every day, we create 2.5 quintillion bytes of data — so much that 90 per cent of the data in the world today has been created in the last two years alone. This data we produce is everywhere – in enterprises, SMBs, in the cloud, on desktops, on mobile phones and more. And it comes from everywhere: sensors used to gather climate information, posts to social media sites, digital pictures and videos, purchase transaction records and cell phone GPS signals, to name a few. This data is Big Data.

The financial services sector all over the world is going through a time of unprecedented change. New players are entering the sector, financial institutions are consolidating and competition for customers — whether in retail, corporate or investment banking — is steadily and rapidly increasing.

In this time of flux, effective use of Big Data and advanced analytics will set apart the financial services providers that succeed. Big Data, if properly managed and applied, can deliver on key priorities: enhancing customer care and creating efficiencies in an increasingly tech-savvy and cost-conscious market. It could also transform the fundamentals of how banks and financial providers consult and sell to their customers, by developing financial products and services with more precision, personalisation, and profitability for both sides of every transaction.

Customers have traditionally remained loyal to providers without being too demanding in how their funds are managed. Financial regulatory climates have tended to favour incumbents, contributing to high entry-level barriers for new players.

Yet those days are rapidly coming to an end. Innovators are already parsing the vast customer information available to them, using analytics to predict how they can (or one day could) improve existing models or create new ones altogether. Any FSS institution which hasn’t prioritised Big Data and its analysis is doing itself a great — and potentially lethal — disservice.

The Middle East’s financial leaders must approach Big Data like they do oil or any other “natural” resource: as a sought-after commodity which powers a range of industries. In this case, however, financial organisations already own much of this new resource in the form of transaction logs, customer histories and performance records across existing products and services. The main challenge is implementing the technical systems and processes to convert existing data into insights that can inform how banks and service providers go about their business.

Big Data can, if used judiciously, alleviate many of the pressures facing the financial industry in the Middle East. Customer engagement, for example, has traditionally been a lesser priority: a recent UAE retail banking survey found that only half of UAE domestic customers and 10 per cent of expats considered customer service satisfactory, compared to a 75 per cent satisfaction rate in developed banking market like the US.

Real-time access to customer data and profiles can allow service representatives to tailor responses and solutions on an individual basis, significantly boosting trust and efficiency. Applying analytics to churn data can similarly help institutions streamline the products and services they offer, pruning less efficient ones while enhancing others; or automate back-end processes which would otherwise require time-consuming manual attention, particularly in compliance and reporting under the region’s increasingly stringent financial regulations.

For example Nedbank, a leading financial services provider throughout Southern Africa, is using IBM’s predictive analytics solutions to improve the customer experience and provide more responsive real-time services. As a result of this technology, the bank has reduced social media monitoring costs by over a million rand a year (US$105,000 per year), while boosting customer service productivity levels by 20 per cent.

Analysis of social media data can not only alert retail banks to emerging consumer trends, but allow their corporate and investment counterparts to better predict market factors that may impact holdings — dramatically shifting how they approach risk profiling and management. Transaction and customer service data can help identify which channels — online, phone, mobile apps, or physical branches — a bank should invest most in; that information can also dictate how global financial leaders, for example, overcome the restrictions on physical branches imposed in many Middle East states on foreign institutions.

In Australia, ANZ Bank is applying IBM’s Watson — a cognitive computing platform that can understand human language — to help wealth management advisors deliver insights to clients. Unlike traditional business analytics systems, Watson can harness structured and unstructured data to answer any question put to it by operators — vastly expanding the scope of Big Data to deliver more accurate recommendations. In the Middle East, similar systems could drive far more effective cross-selling and packaging — an area where incumbents have typically struggled to achieve full growth potential.

The Middle East’s financial institutions must act now if they wish to retain their historical advantages in the region. By approaching their internal data — as well as that of external sources like social media — as a critical growth resource, financial leaders can develop new strategies and processes to derive insights that, in turn, power everything from customer service to risk management and entirely new products. Emerging players can, if they act quickly, turn these innovations into sources of unique brand placement and customer loyalty; while foreign challengers will find them instrumental in breaking into highly-regulated markets as efficiently as possible.

Every financial service provider in the Middle East should be banking on Big Data. As a source of insight, its return on investment is unparalleled — and only just beginning to be realised.

Ahmed Auda is director software group MEP, IBM SWG Mena