Pros and cons as firms go big on data
Panellists:
Moderator: Amit Roy Choudhury, technology editor, The Business Times
BIG Data and analytics, combined with on-the-go technologies such as social, mobile and cloud, collectively called SoMoClo, are giving financial institutions an unprecedented amount of data on its customers. This has presented a great opportunity for innovation in products and services. However, if implementation of new systems to take advantage of this is not done right then problems can arise. To understand the issue involved, BizIT brought together a group of industry specialists to discuss the opportunities, as well as pitfalls for the financial sector.
Amit Roy Choudhury: Technology has become the central nervous system of a company and the health of the business depends on the robustness of its IT. This is particularly so for the financial sector. Can you give your comments on this observation?
Sam Kumar: Data analytics is fast becoming a source of competitive advantage for many financial services institutions. Technology to build new business models is being perfected, thanks to better Big Data platforms and data sources, increased computing power as well as the expertise of the emerging Big Data Analytics discipline. The game changer, however, is in identifying, sourcing and leveraging the relevant data that will drive business outcomes.
In my observation, given the commoditisation of "Big Data" platforms, businesses must be careful to avoid believing that all data can and should be sourced as it will add value to an outcome. This can lead to a loss of focus and wasted investment. Big Data technology and analytics by themselves will not lead to revenue growth. The outputs from Big Data need to be considered as inputs into a more holistic customer engagement process. An analytically led and enabled bank will see a significant impact in customer engagement with the bank where they are using more services and investment products which are helping them manage, grow or protect their wealth securely and efficiently.
Sonny Singh: The financial services sector is certainly one of the most data-driven industries, with ever increasing volumes of customer and transactional information flowing through the enterprise on a day-to-day basis. In fact, analysts estimated that between 80-90 per cent of the data that exists within a bank's data centre is not analysed - these include data from call logs, weblogs, e-mails and documents. Moreover, there are also other relatively new sources of unstructured data that continuously spew digital exhaust via blogs, online channels, as well as social media platforms like Twitter and Facebook.
Indeed, there is a potential goldmine of information in both types of data sources - be it structured or unstructured. Fundamentally, the combination of data from traditional sources and data from new and unknown sources presents financial services institutions (FSI) with new opportunities not only to comply with increasingly stringent regulatory requirements, but also to derive valuable information and insights for a business to stay ahead of their competitors.
Michael Araneta: The convergence of social media, Big Data analytics, and mobile ultimately means that banks can be more contextual in their interactions with customers. Social media data gives much more insight into each customer, things that help understand lifestyle, habits and preferences as well as propensity to purchase certain financial products. The customer's social network is a source of ideas in improving customer engagement based on his or her network of peers.
Big Data tools and predictive analytics technologies offer the potential to analyse vast quantities of customer data and to drive the value of customer insights in order to improve the relevance of every interaction. Such exhaustive visibility is particularly relevant for product offers, which can now be disseminated based on known internal or inferred customer preferences.
As banks undertook their first Big Data pilots, most realised that faster analytics was the underrated promise of Big Data and related analytics - if banks can get to customer insights faster, for example, they can make product offers when the customer is still interacting on the bank channel, not after the interaction has passed. Timeliness is very, very contextual.
And finally, increasing mobile usage provides a lot of new data for the bank to make sense of - whether it is geo-location, customer preferences gleaned from mobile usage, and so forth. The mobile channel is increasingly the most frequently used banking channels, and this has changed the notions of customer access. The bank now has to engage with the customer under the latter's own terms: when the channel is used (services must be provided 24x7 with minimal wait times); what the channel is to be used for (what mobile applications are downloaded onto these devices and how they are used); and where the channel is used (which means contingency provisions for limited connectivity, data ownership, and security).
David Gledhill: At DBS, we have always stressed that a robust infrastructure remains at the core of all that we do, even as we venture to explore evolving technologies as part of our innovation journey. With a robust infrastructure and strong security principles around it, we can then leverage new technologies to enhance the customer experience. We view the ability to respond quickly to customers and to new technologies as a key enabler in our organisation. Hence, being "nimble" and driving innovation are also critical to our success. Over the past few years, technology has moved to the forefront of how we develop product and services for the organisation. We have been focusing on driving synergy across the organisation and better collaboration, with the customer experience as the endgame.
Amit: Customer insights have always been crucial for FSIs. Social media, mobile and the ability to crunch huge amounts of data give unprecedented access to customer data. But in situations where this social data is accessible to every major financial institution, how does an FSI differentiate itself from another and not fall into a "me too" kind of trap where every company offers the same set of services and solutions?
Michael: Social, Big Data, and mobile technologies (part of what IDC calls the Four Pillars, the fourth being Cloud) give banks new tools to improve the quality of customer interactions, but have also shifted upwards and outwards what constitutes quality customer engagement. Never mind how other banks are using or accessing similar technologies, the customers themselves expect the bank to engage with them via these technologies. If you are not able to be contextual with the customer based on social information, or Big Data analytics, or not able to interact with the highly mobile customer, you have failed the customer.
Like most technology initiatives however, a lot of the successes can come from execution. How do you operationalise the new capabilities? How do you ensure that the information you have on the customers get to the customer touchpoint fast enough? For the channels that involve a human interface (call centre, branches, relationship managers) how do you ensure that insights are understood and acted by the frontlines? Information too needs to be passed at the right time (too late, it becomes redundant; too soon, and it becomes mere noise). Information needs to get passed to the right staff, based on his or her skills, his or her approval levels, and so forth. Ultimately, the norm dictates that bank staff needs to know what to do with the information on the customer at hand, with the view of enhancing the customer relationship. Through all these, we know that success will come from ensuring that new technology capabilities are effectively aligned with day-to-day operations.
David: At DBS, we understand that our customers will continue to need banking services, even as they embrace new technologies and an evolving digital lifestyle, but they may not necessarily need a bank - in the traditional way that we understand a bank to be. Hence, we have taken a step forward in our innovation journey to be at the forefront of shaping the future of banking. DBS recently announced that we will be investing S$200 million over the next three years to establish a digital banking initiative.
DBS is also collaborating with IBM to harness Big Data to provide more precise, customised and quality actionable insights that meet our customers' needs. With Asia creating wealth faster than anywhere else in the world, coupled with increasingly sophisticated and digitally-savvy customers, banking relationship managers need to be empowered with sophisticated and intuitive tools that enable them to respond more speedily with insightful and tailored solutions. Applying IBM Watson's capabilities will enable DBS professionals to take control of a "data deluge" and arm them with data-driven insights that can personalise the customer experience.
The competition for financial services institutions will increasingly be coming from non-traditional players such as Google, AliBbaba, PayPal and telcos, amongst others. Beyond data and the customer insights we can derive from these, banks really need to understand what our customers' needs and wants are - their life experiences and the emotive perspective. At DBS, we have undertaken a human-centred design approach, as part of our innovation journey, to achieve this. We have a customer experience lab, where we literally put ourselves in the shoes of our customers to map their experiences, and create and prototype solutions and product offerings.
Sonny: In an era increasingly saddled with diminished product differentiation, tighter margins, increasingly stringent regulatory requirements and increased uncertainty that drive up compliance costs, customer insight is fundamental to cracking the code and achieving new levels of profitability.
While today's FSIs are already recognising the power of customer insights to propel their business advantage, the key to differentiation lies in the ability to make business sense of these key data and turn them into actionable insights for the frontline staff. FSIs have spent countless hours and millions, if not billions, of dollars attempting to attain a comprehensive view of the customer - whether retail, commercial or institutional - only to find that a single view of its own offers an absolutely necessary, but only partial solution.
As a result, the industry is now turning its attention to gaining the analytical capabilities that will enable FSIs to gain an accurate and complete understanding of the customer, as well as his or her total relationship and value to the organisation. Only then is the FSI in a position to truly capitalise on its customer relationships to reduce risk, deliver outstanding services and grow profitably.
However, the challenge for many organisations is that their legacy business intelligence (BI) environments do not have the capabilities to deliver the actionable insights required to invest wisely in their customers. So while FSIs do have an unprecedented access to all customer data, many still struggle to simply calculate the current value of a customer relationship - let alone understand its profitability, the customer's lifetime value, or more importantly, how to optimise its potential.
What FSIs fundamentally need is a redefinition of their approach to short-and long-term customer profitability. In doing so, they'd require an integrated analytical infrastructure that includes a unified financial services data model, shared analytical computations, a comprehensive easy-to-use BI platform, as well as the extreme performance of an engineered system. This carefully crafted approach enables FSIs to gain a broader view and a deeper understanding of their customers, and subsequently unlock new opportunities. By essentially having the right applications and tools in place, organisations will be able to turn customer data from various sources into business insight that enables frontline staff to respond quicker to requests, cross sell products, and engage better with customers, amongst others.
Sam: There is no doubt that how we turn data, both structured and unstructured, into useful information which will help us serve our customers better, is one of the biggest challenges being faced by financial institutions today and will increasingly become a source of competitive advantage. In today's saturated and highly competitive financial services market, products tend to be commoditised. Banks that can use data to support customers proactively, anticipating needs, understanding behaviour, and making it easier and faster for customers to act will have the edge. And this is a significant and complex undertaking requiring a different mindset for all bankers.
Certain Big Data analytics trends are starting to emerge in the US and other countries. Take loans for example, a new crop of start-up lending companies in the US are built on the concept that one's online behaviour - that is, reputation - can be accurately scored by analysing the host of data points we create each day on the web and via mobile devices. This includes interactions and connections on social networks such as Facebook, Twitter, and LinkedIn, combined with more traditional inputs such as employment and loan repayment histories. Once these data points are pulled together via Big Data analytics - presto, a creditworthiness score emerges. Most common are pattern matching, or Bayesian analysis approaches, which make predictions about current and future behaviour. However, before anyone goes rushing in to invest in these overseas start-ups, the big question we have to ask here is how reliable is social network data as a predictor of one's creditworthiness? Whether social networking patterns can accurately predict loan payback probabilities is far from proven, although some of the start-ups in this space are reporting lower default rates, particularly in the payday and smaller loan area.
Amit: The technologies we are discussing can be a double-edged sword. Grievances or customer complaints that previously would have been an issue between the customer and the institution and at the most a mediating authority can now become a public issue via social media. This can do unprecedented damage to reputation. In such a situation how does a FSI embrace the new technology paradigm and at the same time ensure it manages it's customer relationship in the best possible manner?
Sonny: To truly reap a comprehensive customer overview and actionable insights, FSIs must be able to deal with multiple banking platforms, systems and channels - and these include social media. Indeed, social networking and social media are radically transforming the relationships between FSIs and their customers, as well as the ways in which businesses go to market. The phenomenon is being harnessed to broaden brand awareness, increase market share, and encourage innovation.
While FSIs are increasingly recognising social media as an essential business tool in the long term, organisations are still sceptical in terms of managing customer relationships in an uncontrolled environment. Indeed, managing the rich and complex relationships and conversations on the web requires a careful combination of metrics, statistics, monitoring tools and, importantly, human intervention.
This is where Social Relationship Management (SRM) comes in. SRM essentially involves the tracking of any mention of an organisation, its products, brands, or services, and enables the company to manage its presence on the web with the required traceability and human intervention. However, in order to succeed in doing this, FSIs need to first have in place an integrated SRM platform that enables them to: listen, engage, market and analyse social interactions; provide a complete view of constituents including traditional and social media channels; and integrate with overall enterprise business processes and systems. Fundamentally, deploying a robust SRM strategy will enable FSIs to embrace the new technology paradigm and, at the same time, build personal and engaging relationships with prospects, customers, influencers and partners via multiple social media channels.
David: For sure, we have seen the need to engage customers on multiple channels, social media being one of them. Gone are the days when corporations think only about communicating the brand through advertisements and product brochures. Mobile technology and social media now enable brands to constantly engage the customer - and customers have come to expect it as well.
At DBS, we are constantly striving to provide the best and consistent customer experience across various channels and platforms. Our approach is to ensure that we build a robust and secure technology platform, even as we look ahead to innovative solutions for customers' needs - mobile rewards redemption, multiple payment channels, etc.
Michael: One reason why banks approach social media with a fairly high level of fear is summed up in this statement: "Whatever is said out there about you will mostly be negative." So far, the nature of social media is that of customers more likely to complain or give negative feedback, rather than praise or give compliments. Banks need to be prepared to face negative feedback on the social channel.
In the early days of banks' social media strategies, they put together crisis management procedures, especially noting that it is when crises hit that the negative predisposition of social media becomes obvious. In and out of the industry, there have been too many examples that failing to react when such crises hit - and reacting inappropriately - can be damaging to the institution.
Over the years, we have become better in mitigating flare-ups in the social media space. We now understand the conditions that drive dissatisfaction, and further drive dissatisfied customers to the social space. Banks are alerted when adverse conditions occur (ATM and online channels are down, long wait times, for example). With better use of sentiment analysis, banks can more quickly recognise when potential flare-ups begin. For a channel where customer perceptions change rapidly, it is crucial for banks to undertake sentiment analysis on a regular basis - yes, it is possible to do this real time. Analysis can also be on a per-product or a per-division level. Banks need to work in banking-specific, country-specific, and country-specific models for tracking positive or negative sentiment.
Social media strategies now include the capability to quickly identify those customers that are actively dissenting, or giving complaints, and also to be able to gain access to them and to communicate to them the bank's position.
Sam: Standard Chartered's Breeze mobile banking and lifestyle apps strengthen our relationships with existing customers and helps us to reach out to new customers, especially the younger generation who are active users of digital channels. At Standard Chartered, we're always looking at ways to engage our customers more around the bank's brand and to create a dialogue about what "excellence" in banking should stand for. And using social media to talk to customers about products, facilitate social sharing is a crucial part of that engagement.
Data analytics and increasing digitisation offers great opportunities to personalise services for hundreds of thousands of customers in a cost-efficient manner. And in reality banks are only just beginning to explore these - integrating online banking with call centres, for example, or using video conferencing and social media to let customers connect with relationship managers, are still very much in the early stages of their evolution. We recognise now more than ever the need for agility in this area given the growth in and the viral nature of social media.
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