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Big data and banks: The growing relationship

Zafar Anjum | Jan. 3, 2014
Banks have had analytics and decision management tools in place for a number of years. What is happening now is a move away from human insight, and instead we’re seeing a stronger reliance on real-time analysis through technology, says Dr. Andrew Jennings, Chief Analytics Officer, FICO, in this interview with CIO Asia.

It depends on how you define the notion of an analytic tool. A small thrift or rural bank may be taking hand-written application forms for loans and then the manager will use a form of scoring to decide if the money should be lent. It's not a sophisticated computer automated process but it's still a form of analytic tool. So the answer is yes, all banks use analytics tools in some form, and many are adopting more advanced technology to help predict customer behaviour. 

We are seeing larger banks with a strong market presence take advantage of analytic tools to aid their decision management process, detect fraud, enhance CRM, and predict future behaviour in real time. These banks often have a large IT budget which allows for investment in analytics, whereas smaller, local banks may not have the same opportunity for analytics investments. An increasing number of customers are benefiting from banking's utilisation of analytic tools too. Whether it's because they are safer from fraud, receive a better rate on their loan product, or are made more relevant offers, analytics can improve the service and relationship people have with their bank. In my view, banks which do not reserve a portion of their budget for analytics will likely suffer in the market from smarter, leaner competitors that can react quickly to changing conditions.

Do you think different verticals should use big data differently? Like retail and banking sectors?

Regardless of the vertical, the purpose behind analysing big data remains the same - to gain valuable insights that can be applied to enhance business processes and give the customer a targeted offer at the right moment. Companies like Amazon, for example, have benefited by scientifically working out which book or product you are likely to want to buy next. Organisations that thrive will develop clever ways to better understand and anticipate the needs of their customers. All the analyst firms agree that we are entering 'The Age of the Customer', so this is a long-term trend that is going to dominate the next ten to twenty years. We are only at the very beginning of all of this, so a lot lies ahead in terms of the transformative effect it will have on every single industry.

What are the security pitfalls of big data, if any?

The amount of personal information, including transaction histories and bank account information is rapidly shifting into the digital space. During this time of transition, security has to keep pace with the changing rules laid out by different government and regulatory bodies to ensure data security - both of the bank's assets and the individual/customers' private information. As marketplaces open up that essentially allow organisations to outsource elements of the big data and analytics process, areas like security can be better managed by specialists.


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