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Machine-generated
data is projected to rise from todays 200 exabytes to 1,000 exabytes by 2015.
Multi-structured
data content is the primary driver of new data. 80% of this new data is digital, which is complex to analyze in its native structure.
precise answers to the challenges posed by fast-changing consumer demands; many lack the ability to process data in near real-time or convert interactions into transactions.
data is growing at 62% annually vs. structured data at 22%.3 This explosion of data coupled with the growth in social networking and virtualization, has introduced unprecedented opportunities for companies to better connect with consumers and their sentiments, Most companies understand as well as where the markets have yet to find are heading. Most companies have yet to find precise answers to the challenges posed by fastchanging consumer demands; many lack the ability to process data in near real-time or convert interactions into transactions. Big data analytics, therefore, has become one of the most frequently discussed topics for many business leaders.
Digital
can now be aggregated and analyzed to identify escalation and complaint triggers, understand fraud patterns, manage alerts, reduce credit risk and build social media dashboards. These developments can help financial institutions tailor their products and build strategy roadmaps aligned with customer expectations. Effective use of big data will be a key driver for competition in financial services, and companies that use data more effectively will secure an edge in the marketplace. Retaining customers and satisfying consumer expectations are among the most serious challenges facing financial institutions. Sentiment analysis and predictive analysis are two techniques that they can use to effectively address these and other key challenges.
Emerging big data tools provide companies with the ability to analyze far greater quantities and types of data in a shorter span of time. It includes structured datasets, such as information stored in databases; semi-structured data like XML files and Snippets of RSS feeds; and unstructured unstructured data datasets, such as images, can be interpreted and videos, text messages, e-mails documents. New technoloanalyzed, delivering and gies can help uncover insights insights that can hidden within these large determine likely datasets. While retailers and companies such as consumer response technology Google, Walmart, Amazon and (both favorable Sears have made significant and unfavorable) to developments on this front, doors are just starting to decisions made the open for the financial services by the bank. industry, which stands to gain significant advances in areas such as market research, customer segmentation, product testing, product development and customer service. For example, text captured from credit applications, account opening interviews, call center notes, mortgage application notes, social media chatter and other customer service interactions
sources, and help banks evaluate the potential impact of such decisions. Sentiment analysis enables organizations to associate words used in unstructured communications and tie them to consumer emotions and sentiment on a topic. These findings can serve as key inputs into strategic decision-making. The idea is to use technology to create codes that analyze the Web and provide insights into consumer sentiment on a much larger scale and at a much faster rate than the findings revealed by surveys or focus groups. Snippets of unstructured data can be interpreted and analyzed, delivering insights that can determine likely consumer response (both favorable and unfavorable) to decisions made by the bank. Consider the following customer scenarios and statements:
service features. This can help banks generate customer wish-lists and incorporate these into their product roadmaps. Sentiment analysis can also help banks reward customers effectively. This is extremely important across the industry because account switching costs are relatively low and customer churn is a major challenge. By examining customer confidence indices that are driven by specific data elements (product, func- By examining customer tionality, content and confidence indices that price), banks can judge the are driven by specific mood of the market and decide how to best reward data elements (product, their customers. Success- functionality, content ful execution drives loyalty and price), banks can and also attracts new customers. Figure 1 illustrates judge the mood of the how banks can effective- market and decide how ly satisfy a disgruntled to best reward their customer using the aforecustomers. Successful mentioned technique. Although the technologies behind sentiment analysis and also attracts are still maturing, many of customers. the tools and techniques are advanced enough for financial services institutions to derive incremental value by understanding customer likes, dislikes and preferences for product and service improvements. Clearly, early adoptors will gain a competitive advantage going forward.
for new businesses and entrepreneurs. The lack of a same-day payment facility is a downer, though. feature to view both business and personal accounts is really cool, although they really need to improve their customer service.
The
The sentiment analysis tool would pick up words like useful, lack and improve and attach contextual meaning to generate graphs and reports, which can then be used by the bank to satisfy customer expectations. Additionally, reports can be generated to illustrate trends and opinions on individual product and customer
Michael has recently registered several complaints with customer care at his bank.
suggests a disgruntled customer that is likely to churn. The bank recognizes this and takes immediate action. a new car loan.
personal note addressing his concerns. his auto loan at a much better rate, saving him money and gaining his loyalty in return.
Figure 1
churn or favorable response to a particular marketing campaign. For example, our work with Merchant Rewards International, a provider of credit card processing services, indicates a higher response rate for offers aligned with previous transaction behavior and buying propensity. Predictive analytics can help banks build models based on customer spending behavior and product usage to pinpoint products and services that customers might find more useful and that financial institutions can deliver more effectively. Such a model can help banks develop an efficient cross-sell offer, helping them increase their share of wallet, garner loyalty and increase profitability. For example, profiling technology can help credit card companies identify transactions, cardholders and merchants that exhibit a high probability of fraud. Institutions can create pre-defined profiles, thereby revealing a history of higher fraud volume through purchase types and ticket sizes. Furthermore, predictive analysis can identify aberrant behavior patterns and help financial institutions prevent fraud. Collecting data from multiple sources, such as Web behavior and pointof-sale inputs, and correlating it with aggregated data compiled from other financial services firms by third-party providers, can help banks and brokers detect fraud earlier than existing approaches. Big data analytics not only helps financial institutions preserve the long-soughtafter instant transaction user experience, but it can also safeguard them against fraud.
transaction to go through if the generated score probabilistically determines that the purchaser is actually Michael.
Figure 2
A good example is the ongoing refinement of neural network technology5 to assess whether a credit card transaction is being performed by the real cardholder or someone committing fraud. The transaction is scored against a predefined profile, and if the score passes an established cutoff, it is approved; otherwise, it is held for a fraud check. Banks have used this type of artificial intelligence technology since the early 1990s to perform pattern recognition and spot fraudulent transactions. However, big data technologies make the process faster and more costefficient, accurate and robust. Financial institutions can also create predictive scorecards, which can help determine the likelihood of customers defaulting on payments in the near future. Among the parameters to consider are late utility bill payments, late car insurance payments, increases in purchases compared with monthly averages and listening and learning from relevant social media conversations. As with sentiment analysis, additional research and development is required to improve the accuracy and effectiveness of predictive analytic techniques. However, when deployed strategically, these tools can help banks gain a significant advantage in a competitive macro-economic environment. Areas such as delinquency propensity, loss mitigation and cross-sell/next-best-offer scripting are all specific areas offering a solid business case for use of analytics techniques. Financial institutions are making investments and hiring outside
talent to accelerate their analytics efforts, as they often lack internal expertise or cannot afford to stretch existing resources. In some cases, instead of hiring and motivating talent internally, they are engaging third-party providers to supply talent on an as needed basis.
Looking Ahead
Big data analytics can help financial institutions derive significant benefits by increasing customer satisfaction, retention and expansion through more effective cross-selling and improvement of their fraud and risk management capabilities. The economic value of data will be realized only when financial institutions fully endorse As risk managers big data analytics and invest frequently say, in innovation. Although the it is better to be possibilities are endless, numerous challenges must approximately right be addressed before the than precisely wrong. benefits can be fully realized. In a special report in The Economist, author Kenneth Cukier reveals that the recent global financial crisis sheds light on how banks and ratings agencies relied on models requiring vast volumes of information but failed to reflect financial risk in the real world.6 Therefore, to capitalize on big data analytics opportunities and realize significant business value, it is advisable for financial institutions to start small and grow gradually. Firms must find the right balance of required information and desired insight. As risk managers frequently say, it is better to be approximately right than precisely wrong.
Footnotes
1
Worldwide Big Data Technology and Services 2012-2015 Forecast, IDC, March 7, 2012, http://www.idc.com/getdoc.jsp?containerId=prUS23355112#.UQwxhuTAeE4. Big Data: The Next Frontier for Innovation, Competition and Productivity, McKinsey Global Institute, May 2011, http://www.mckinsey.com/insights/mgi/research/technology_and_innovation/big_data_the_ next_frontier_for_innovation. Worldwide Big Data Technology and Services Forecast, IDC. Tara Siegel Bernard, In Retreat, Bank of America Cancels Debit Card Fee, The New York Times, Nov. 1, 2011, http://www.nytimes.com/2011/11/02/business/bank-of-america-drops-plan-for-debit-card-fee. html?_r=0. Donald F. Specht, Probabilistic Neural Networks, ScienceDirect, 1990, http://www.sciencedirect.com/science/article/pii/089360809090049Q. Data, Data Everywhere, The Economist, Feb. 27, 2010, http://www.emc.com/collateral/analyst-reports/ ar-the-economist-data-data-everywhere.pdf.
3 4
References
Julianna DeLua, Big Data Meets Sentiment Analysis, The Informatica Blog, June 27, 2011, James Taylor, Predictive Analytics: Making Little Decisions with Big Data, Information
Financial Services Data Management: Big Data Technology in Financial Services, Oracle Corp., June David Wallace, Big Data Management for Retail Banks, SAS, The Knowledge Exchange, July 6, Christopher Papagianis, Can Silicon Valley Fix the Mortgage Market? Reuters, April 25, 2012,
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