Differentiation and creating a competitive edge are critical to the success in today’s fast-paced, highly consumerised environment. However, achieving this can be a challenging task for any business, and the banking and financial services sector is no different, writes Shailendra Singh, vice-president: banking for Africa and Europe at Wipro.
Faced with the challenge of increasingly commoditised products and services, banks need to stand out from the crowd if they are to get ahead, gain market share and improve profits. Traditional methods of business are often no longer relevant, and their continued use can hinder innovation and prevent banks from delivering appropriate customer solutions and interactions. Incorporating analytics into every stage of the customer lifecycle is the solution, and financial services institutions need to gear themselves to take advantage of the benefits delivered by this powerful tool.
In the financial services sector, particularly banking, the products and services offered by competing brands are all incredibly similar. From current accounts and savings products to investments, loans and credit cards, there are few differentiating factors between the offerings of each different bank.
Competing on product is therefore all but impossible. However, often sales staff are put under immense pressure to meet sales targets despite this. Ensuring they are able to effectively market products to consumers requires that they are given the information they need to do their jobs, as well as direction that leads the way to sustainable business. Analytics is the solution to providing sales staff with the information they need to take products to market with confidence.
Enhancing the sales cycle
The sales cycle within financial institutions consists of a number of steps, beginning with knowing the target audience and ascertaining whether or not they meet eligibility and profiling criteria. From there, sales calls and follow-ups are conducted, and then deals are (hopefully) closed. Sales targets are then tracked and monitored.
The cycle itself is fairly simple, but can be greatly enhanced in the first stages to improve effectiveness throughout. Providing sales staff with appropriate and timely information utilising analytics can improve efficiency down the line.
Besides the basic information of probable customers, their preferences and a list of products they do not yet own, customer information can be greatly augmented using analytical capability. For example, solutions like Next Best Offer use predictive analytics to identify the products or services that customers are most likely to be interested in for their next purchase.
Monitoring credit risk requires an understanding of the types of customers the bank has, as well as the ability to monitor collections, predict and reduce delinquencies and reduce non-performing assets. In order to achieve this, analytics is an essential tool. Analytics is also vital across various functions of the business, from marketing and sales to Human Resources and finance.
Not only does analytics assist users to draw insight from data, it can be used to improve the decision-making process, moving from gut decisions to intelligent, fact-based decisions, which ultimately enhance business success. Analytics also helps users to develop ‘what if’ scenarios that can predict future behaviour, essential for improving planning and product offerings.
Building analytics capabilities
While analytics offers numerous advantages, many financial institutions have yet to acknowledge its importance from a strategic point of view. This is an essential first step in building the required analytical capabilities to deliver improved competitive edge. It is also essential to obtain buy-in at a senior level, as the success of analytics initiatives requires it to be driven from the top down.
Analytics should become a cross-departmental function, working across different verticals, lines of business and departments within the bank. In addition, the analytics team should not consist solely of statisticians and IT professionals, but also thought leaders and leaders from within the different lines of business.
It is also important to firstly identify a high-level business problem and a potential solution, which analytics could help to solve. For example, reducing customer churn may be the problem statement, and from there the next step is to arrive at a solution and identify how analytics can be used to overcome the problem. This requires that the right tools are implemented and the right service provider is partnered with.
In addition, it requires that the business problem be clearly articulated, so that the solution provider can translate this into processes and a technology solution. Analytics is a step-by-step journey, not a destination, and requires continuous improvement to yield the desired benefits.
The benefits of analytics
Successfully implemented, analytics can deliver numerous benefits across the sales cycle. Customer identification and acquisition can be improved, through acquisition analytics and intelligent campaign design. Customer relationship management can be enhanced via improved portfolio management and meeting transactional needs. Customer cross selling can be enhanced using needs analysis, family demographics, credit history analysis, and the ability to select more products for cross selling.
Customer retention can be improved using churn prediction and lifetime value modelling. Customer value can be enhanced, and wallet share increased, using behavioural segmentation, product affinity modelling and differentiated pricing. Analytics can provide the senior management with valuable inputs at each stage in the customer lifecycle. This translates to a better customer experience and enhanced profitability for the bank, giving the all-important competitive edge and enabling them to differentiate on service rather than attempting to differentiate on product.
Analytics offers numerous benefits to banks and financial services organisations. From improving marketing efforts through enhanced targeting to ensuring optimal performance across functional areas such as risk, compliance and fraud, analytics helps to improve decision-making ability and timeframes. Using analytics, banks can not only differentiate themselves today, but will be able to continue to remain competitive in the future.