Commercial lending depends on the evolution of analytics in banking

September 7, 2016 Uncategorized
How does analytics work in commercial lending?

As the amount of data in the world continues to grow at an exponential rate, so too does the need for advanced analytic tools in order to make sense of the massive amount of information. Somewhere around 2.5 quintillion bytes of data were being created every day in 2011 – now, five years later, that number is no doubt even more astronomical.

Being able to analyze general trends using all of this data is a key skill in any industry. Here's an example: In the movie "Moneyball," the general manager of the Oakland Athletics baseball team used analyses of players' performance to create a winning strategy in the area of player trading – thereby saving the team money in the long run. This is only one example of how statistical analysis can be used to improve operations and save money in the long run – but nearly every field, from airlines and the hospitality industry to retail and technology, has benefited from analytics.

Traditionally, however, the same cannot be said of the commercial lending industry. While there is continued reticence toward utilizing analytics during loan pricing negotiations, a data analytics strategy could be just the thing necessary to price loans consistently and accurately.

"Analytics can be used to improve efficiencies and effectiveness when it comes to determining customer needs."

The importance of data

Financial organizations can use analytics to create more effective strategies in terms of loan pricing and risk assessments. According to The Financial Brand contributor Jim Marous, understanding customers is the key to success in banking, and analytics help organizations gain important insights into their customers' habits and needs. The economic atmosphere of today is only going to necessitate that banks have an analytics strategy that drills down into customer data and draws out these key insights.

"With customer delivery and communication channels expanding, and more customers interacting with their financial provider using online and mobile channels, always-on, real-time sales and service become imperative," Marous wrote.

Analytics can be used to improve efficiencies and effectiveness when it comes to determining customer needs and general trends within the financial services industry. Marous pointed out that data can also be critical in helping to integrate a new digital environment with sales and service tools – which can bring high-touch customers back to the business.

Analytics is important in commercial lending.Analytics is important in commercial lending.

Making your toolset count

Along with analytics, it's critical to have the right systems in place in order to glean the best results from the data collected. Analysis of customer information can provide accurate risk assessments and help banks make proactive decisions in terms of loan pricing.

"Banks can set optimal prices by identifying the customer characteristics that go along with price sensitivity," wrote Deepak Goyal, Sumitra Karthikeyan, Vikrant Kulkarni, Victor Noguera and Ian Watchers for BCG Perspectives. "And with the right training, tools, incentives and governance, [banks] can consistently achieve those prices."

Just as important as analytics itself is using the right tools to parse through this data. DealPoint software from Brilliance Financial Technology provides financial organizations with the capabilities to correctly price loans while maintaining compliance and accurately servicing customers' needs.

Get in touch with Brilliance today for more information about our DealPoint solution.