Sep 17 2020

How Data Analytics Tools Help Guide Decisions for Banks

While the power of data-based decision-making is clear, financial institutions are just scratching the surface of the benefits.

Data is an increasingly important tool to help businesses across industries make decisions that keep them moving and improving, but financial services may not be fully taking advantage of those benefits.

Research from McKinsey has found that while sectors such as pharmaceuticals and energy have successfully leveraged data-driven opportunities for growth, the banking industry has struggled to find ways to integrate data deep into their offerings, costing them potential opportunities at big wins. In fact, other industries are finding success with data at a rate three times that of banks. Retailers have found ways to better service customers even amid the disruption caused by COVID-19.

Such opportunities for data-driven growth during the pandemic exist for the financial services field as well, says Jeffrey Feinstein, the vice president of global advanced analytics strategy for LexisNexis Risk Solutions.

“It’s really provided jet fuel to the digitization of identity in general, and it’s a vision of that data where we’ve migrated from person-to-person cash transactions,” he says. “All of these local transactions have migrated more and more to online platforms, which have provided a lot of additional information to financial services institutions to mitigate those sorts of transactions and make far more services available.”

The trick is actually taking advantage of the data that’s already been gathered. So, how can the financial services make the most of these tools?

Why Data Can Play an Important Role in Banking Growth

Data is the basis of strong business intelligence, helping leaders to make decisions that go beyond surface-level analysis.

Not only can it help increase revenue by enabling your bank to focus on its most valuable customers, it could also help solve or mitigate issues like fraud. And by being agile with your data strategy, the possibilities are endless, says Feinstein.

“We need to open our minds to more flexible and innovative uses of that data, because I think the priority decisions will change depending on how we think about the data,” he says.

Those insights must be ultimately grounded in daily operations. The McKinsey report notes that banks often run into challenges translating larger strategic insights into day-to-day goals. Feinstein points to the potential of deep integration online as a way for banks to translate the same mindset into their in-branch approaches, which has been made easier with the rise of digital transactions.

“We’re transacting more and more on digital platforms, and less on brick-and-mortar platforms,” he said. “That has provided opportunities for banks to integrate data sets to really get more holistic programs to help identify the sorts of opportunities.”

MORE FROM BIZTECH: Learn how small banks and credit unions can make a responsible transition to the cloud.

The Types of Data Banks Should Be Tracking

There’s a lot of potential for data gathering, both for business and customer insights. This allows for stronger strategies to be built around historical analysis, marketing automation, performance analytics and regulatory compliance.

With data so prevalent in many transactions, it can be tempting for organizations to gather everything. However, Feinstein notes that the idea that data must be gathered at scale may not necessarily be compatible with other considerations that matter to financial institutions, such as privacy.

“It’s really important that part of the data program include responsibility and responsible use of data, both as a steward of that data but also in building capabilities with transparency and fairness baked in,” he says.

The Tools That Can Help Banks Reveal Trends

Data analysis tools such as Splunk and Microsoft’s Power BI can help financial institutions make better sense of the information they’ve gathered and turn those insights into actionable steps.

But finding the right solution to organize a complex amount of data takes effort, and it may take time to find the exact toolset that works best for each bank. Some financial institutions may find it worth investing in a research and development arm to figure out what solutions work best for their needs.

Wherever organizations choose to direct their focus, it ultimately matters that you spend time building out your tools with the future in mind. Financial services firms that analyze many trends ahead of time will be able to act on them.

“We’re really thinking about the strategic implications of that capability in two years versus tomorrow,” Feinstein says of the evolution of R&D, “But it’s really, really important to do.”

DISCOVER: Learn more about how banks can use technology to get future-ready.

ILLUSTRATION BY TRACI DABERKO