Bank technology tip: Trust the analytics

Analytics is the new big buzzword in today's fast-paced business world, and for good reason.

Organizations in every industry are collecting, storing and analyzing big data sets that allow them to create better products, provide better services and transform into better companies all around. In fact, the Economist Intelligence Unit reported in early 2016 that 60 percent of the 476 executive respondents felt that data was generating revenue within their organizations, according to Forbes. Eighty-three percent said it was creating better profitability for existing products and services.

Banks are taking advantage of analytics, as well. Within the banking industry, organizations are now utilizing the insights gained from synthesizing their consumer data to create more profitable loan pricing strategies, manage risk more effectively and maintain regulatory compliance at greater success rates.

However, despite the general trend toward using analytics tools in banking, decision-makers still tend not to trust the insights that come from intense analysis of their big data sets. Here's why that's a major misstep.

Why the lack of trust?

Despite the immense benefits of incorporating big data insights into business operations, banks have yet to adopt analytics on a grand scale. It's becoming more common, but this curious lack of trust is still standing in the way of organizations being as efficient and effective as they could be.

It's not just the banking world, either. According to a survey conducted by KPMG and Forrester Consulting, only 38 percent of executives are highly confident in their customer insights, even though most of the survey respondents said these insights were critical to business decision-making. This discrepancy could be the result of a few factors – either executives are still reliant on old-school decision-making based on gut feelings, or the complexity of analytics is too daunting.

This more often than not leads to confusion in the way that bank managers deal with loan pricing and customer profitability-related tasks. In other words, if they don't trust their customer insights or really understand what they're looking at, they could make poor decisions.

"As analytics increasingly drive the decisions that affect us as individuals, as businesses and as societies, there must be a heightened focus on ensuring the highest level of trust in the data, the analytics and the controls that generate desired outcomes," said Christian Rast, the global head of data and analytics and a partner with KPMG in Germany. "Organizations that continue to invest in [data and analytics] without determining its effectiveness could likely make decisions based on inaccurate models, which would perpetuate a cycle of mistrust in the insights."

"With the best technology, bank managers can learn to lean on their analytics."

Prescriptive and predictive analytics are your friends

When banks have access to the kinds of key insights that big data analytics can provide, they can rely less on their intuition and more on concrete data points. In this way, they can be more accurate when pricing loans and assessing customer risk – resulting in increased profitability and better banking practices in general.

"Uncovering data patterns sets the stage for conducting predictive analytics," wrote Harvard Business Review contributor Prasad Chintamaneni. "Like Facebook and Google do, financial institutions can tap the imagination of millions of people, creating contextualized and personalized experiences."

It's easy for decision-makers to let themselves be swayed by a salesperson. However, bank managers need to pay more attention to the data and the analytics provided by tools like DealPoint. These kinds of solutions grant banks access to critical insights necessary to make the best decisions possible. With the best technology, bank managers can learn to lean on their prescriptive and predictive analytics – because they know the insights gathered are trustworthy.

For more information about DealPoint and about how using data analytics can benefit financial services organizations in the long term, contact the fintech experts at Brilliance Financial Technology today.