Data is the new black - or, perhaps more relevantly for the UAE, the new oil. With one important distinction: data’s market value is not going down.
Most bankers agree that data is the new black - or, perhaps more relevantly for the UAE, the new oil. With one important distinction: data’s market value is not going down. On the contrary, data is proving to be a dramatic differentiator in a market that has seen traditional banking products and services become commodities.
There is no time like the present. Analysis suggests that many banks – both here in the UAE and globally - continue to make decisions by looking back at what may have gone wrong. However, leading organizations are using new analytics tools to predict the future—and getting it right. Banks live and die by data, but are internal sources sufficient? The more data-rich the models are, the more accurate they are, which is why local banks have started combining internal bank data with external sources. For example, the Dubai data law (2015) ensures that data gathered by Dubai government entities can be shared with the private sector to capture the benefits of that data for the emirate’s residents and visitors. The open data platform will soon host a wealth of aggregated data, representing a gold mine for any organization, not just banks.
Our 2016 Global CEO Outlook confirmed that many global CEOs clearly feel they are not keeping up and identified data and analytics as one of their top three investment priorities for the next three years. But how and where should organizations start? Investing in D&A can be extremely expensive: infrastructure, software and services costs, combined with a serious, difficult to solve scarcity of skilled D&A personnel, are one reason the D&A “solution-as-a-service” model has become pervasive in many smaller and medium-sized banks.
As banks digitize front-end processes and increasingly turn to targeted digital marketing, there is still more information available that can be analyzed to predict behavior and outcomes. If predictive analytics can identify the customers who will ask for a personal loan in the coming weeks or months or accurately predict when a particular SME customer will default (and how far into the red they may be), why say no? After all, it is much easier to get internal alignment and make decisions if you already know what is going to happen.
From a marketing perspective, D&A is easily the most valuable technology, outperforming marketing platforms and wearables. D&A can improve the accuracy of targeting and increase conversion rates. Marketing platforms enable banks to reach customers digitally, expand their target market and significantly lower the cost of both reaching desired customers and launching new products and services. While customer acquisition is a thorny issue in a busy banking environment, advanced analytical approaches help sales officers identify acquisition leads by analyzing customers’ social networks.
D&A drives better forecasting by analyzing sales patterns to optimize limited resources like human capital costs or staff allocations by branch. Running accurate, multiple what-if analyses helps product and service departments to forecast financial impact and adapt services to customer demand - or competitor activity – more quickly. In a similar fashion, using data pointers throughout existing back-, middle- and front- office processes allows accurate and fast analysis of where inefficiencies lie and generates valuable insights into how to gain operational advantage.
Lower profits encourage courageous cost-cutting actions, such as increasing the productivity of sales officers, predicting employee performance and lowering attrition rates. Questions like how to identify and retain the salespeople with the greatest potential; who should be invested in and how; why the performance of salespeople differs; which salespeople are considering leaving the company; and how to keep those with the most potential can be – at least partially - answered using D&A algorithms that analyze structured and unstructured data, combining endogenous and exogenous data to form a universe of thousands of data points for each individual and then generating insights for each particular question.
The effective use of data is enabling businesses to operate more effectively. Although D&A is currently seen as a differentiator, it will soon become a necessity to survive in an increasingly competitive and digitally driven market.
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