How advanced analytics is redefining banking
Banks are, in our opinion, the most critical institution in any economy, and many economists agree with this notion. Without trusted banking institutions, an economy can’t achieve or sustain its economic growth.
The banking industry has gone through significant transformations throughout history, especially since the 20th century. From the introduction of cheques in the early years of the century to the integration of IT systems in the latter half, banks across the world have adopted new and improved processes to enhance their financial services.
Today, the banking industry is in the midst of another transformation—a digital one—which has the potential to fundamentally change how banking operations are conducted. This transformation is driven by the emergence of radically different FinTech solutions that are threatening the business of regular banks.
These FinTech solutions are built on the foundation of advanced analytics and are based on the digital-first principle, allowing them to provide banking services that are more tailored to each customer, cost-effective, and most importantly, convenient for the end-user.
Faced with this challenge, banks must adopt advanced analytics to stay on top of the changes in the finance industry, and many banks across the globe have started to do so.
In this post, let’s explore how advanced analytics is redefining banking and helping the industry take on the competition of digital-first finance companies.
Advanced analytics is increasing the agility of modern banks
Traditionally, banks—especially established banking institutions—have been reluctant to change and slow to adopt the latest and greatest technologies available to them. This hindered their ability to respond to changes in the dynamic financial market.
Many banks still use legacy solutions in their daily operations. According to a recent report, 92% of top global banks are still using IBM mainframes—which were introduced almost 50 years ago—to store, analyse, and process data.
Compared to these legacy systems, advanced analytics solutions allow banks to process large quantities of data and produce relevant, accurate, and timely insights, enabling decision-makers to take data-backed decisions while increasing the agility of banking processes.
It helps banks reduce operational costs
When it comes to banking, time is money. Banks constantly improve their processes to enhance operational efficiency and reduce operating costs. That said, legacy data analytics solutions are the biggest bottlenecks to efficiency.
Due to their limitations, these solutions can’t produce insights at a rate required by modern banking operations. In addition, banks spend more than 80% of their IT budgets on maintaining legacy analytics solutions.
Advanced analytics tools, on the other hand, produce analytics in real-time and are 75% more cost-efficient to maintain, thereby, increasing the efficiency of banking processes.
To understand how advanced analytics is redefining banking, it is important to also note that it helps banks identify better and safer investment opportunities, reducing the probability of losing money on risky investments. For example, data analytics allows banks to identify potential business expansion opportunities by producing insights about market demand, the size of the market, and more.
Advanced analytics helps increase customer loyalty
Most people find a bank in their teens or early twenties and stick to that bank for the rest of their life. Today, that trend is changing due to the abundance of online banking options available for customers.
Many customers are prepared to leave their banks if they are not satisfied with the products and services offered to them.
That said, advances in data analytics can help banks identify the preferences of their customers by analysing transactions and personalising their products to meet the specific needs of each customer, increasing customer loyalty. This can also help banks upsell complementary services to their existing customers.
In addition, data analytics can help banks build a more intuitive customer experience and enhance their customer service.
Banks must adopt advanced analytics to survive the dynamic business landscape
Due to the emergence of FinTech solutions, traditional banks are at risk of being overlooked by customers. By studying how data analytics is redefining banking processes across the globe, banks understand the potential of advanced analytics.
On top of that, advanced analytics is the tool banks need to overcome the challenges of the modern business environment.