What are the BI trends in the banking industry?
With a wealth of investment in data and specialist highly tailored operational systems we are not seeing a shortage of data, the issue that’s driving the trend is that those data assets need to be turned into information and deployed to the right parts of the organisation where they can have the most impact. In the Performance Benchmarking research sponsored by Cognos for European banks we’re seeing a number of strong trends. Customer insight, channel management, operational efficiency and marketing effectiveness all appeared in a broad range of metrics where banks were investing. What seems critical though is the most successful banks are those identifying key areas of performance that are closely aligned with their strategic objectives. For example – for a multi-product retail bank, branch performance and customer profitability are driving what gets measured. Those measures and strategies are not necessarily exactly the same for a monoline, direct or business banking organisation.
«It’s not just about management insight, but ownership and acting on the information presented that needs a complete BI suite presentation» Laurence Trigwell, senior director, industry marketing at Cognos
Additionally of course the need for a consistent view is also being driven by growing compliance demands. The data to build the regulatory response is typically available (and of course there are specific treatments to meet the regulatory intent – e.g. Basel II) but aggregating consistently and disseminating that information to the right management teams, compliance officers and business units delivers greater visibility. It also makes regulatory disclosure easier to deliver and more consistent with the daily management processes and business insight.
What will be the focus of BI-deployments in the banking industry? (controlling, analysis, operations and which departments)
We’re seeing two strong themes as we discussed earlier – risk and compliance and the need for increased profitability. That translates into a need to provide better senior management monitoring and controls from a compliance point of view, but simultaneously a need to identify the most profitable customers, service them excellently, market to them efficiently and appropriately. It’s not just about management insight, but ownership and acting on the information presented that needs a complete BI suite presentation. We are seeing the growth of finance as an independent arbiter of performance measurement and data definitions, which inevitably leads to incorporation of controls, finance planning and statutory consolidation.
In your opinion, what is the status of BI deployment in the financial sector? Are banks innovators or latecomers in regard to BI?
This tends to vary by region and bank of course but I see them as innovators. It’s a competitive, relatively mature market with multiple participants. Data and people are their primary assets. BI is being used to better inform their staff and allows them to service their clients to better effect. In an industry where client retention is critical you can see how this makes sense.
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Where is the most important backlog or call for action for banks and Sparkassen?
Customer profitability and linking it to an enterprise response to risk management and compliance is the most important backlog that exists. The ability to get an accurate and granular view of who the most profitable customers are, what makes them profitable – and of course unprofitable – and the cost profile of the channels through which they are serviced is key to maximising bank efficiency. Taking that one stage further, if you can add ever more robust risk-based pricing approaches that are executed at the customer relationship management level it’s possible to see how that translates to increased capital efficiency. Success here has to lead to competitive advantage or a better defence from larger international entrants.
So far high costs have been a barrier for banks to invest in BI. How fast can banks get a return on investment? What is your experience?
The performance benchmarking research (carried out by Business Application Research Center (BARC) in association with the Cognos Innovation Center. 150 managers from large companies in Germany, France, the UK, Sweden and Netherlands were questioned, to investigate the potential and limitations of business intelligence systems with regards to improving corporate governance) indicates a number of critical performance metrics that fall into three categories: customer metrics, financial metrics, operational metrics. Banks are focusing on those that generate greatest return and that most closely align with their strategy. This is where banks should start on their own journey to enterprise BI. When banks get this right and deliver the right information into the hands of the right people, there’s no shortage or buy-in and commitment that follows.
What are the main business drivers? Compliance or the need for an increase in productivity?
There’s certainly a significant element of regulatory fatigue appearing and maybe that’s because it can sometimes be seen by banks as a mandatory spend offering limited productivity benefit. We’re seeing banks starting to use BI to meet regulatory intent rather than just a box ticking exercise and turning this into competitive advantage. For example – one bank we’re working with is providing risk information to its customer relationship managers and measuring them on risk-based metrics. That’s obviously a step beyond capturing, aggregating and providing risk information to senior management and external regulators after the fact.
Cognos
Cognos ist einer der weltweit führenden Anbieter von Business Intelligence- und Corporate Performance Management-Lösungen (CPM) für die Bank- und Finanzdienstleistungsindustrie. Neun der Top-10-Banken in Europa und in den USA verwenden Cognos-Lösungen. Cognos bedient mehr als 23.000 Kunden in über 135 Ländern. www.cognos.com