By Sunil Pandita
Remember English philosopher and scientist Francis Bacon’s famous quote, “knowledge is power?” For the longest time, this famous saying has been etched into our mind. However, this adage has been tweaked to fit the modern-day scenario for industries like banking better—”data is power.” For financial institutions, every tap, swipe, and click leave behind a little breadcrumb of information that get collected in a growing pool of data.
However, banks face the biggest challenge when transforming data into useful, actionable insights for better decision-making and improved service delivery come into the picture. This is where advanced analytics step in. It helps banks translate raw data into valuable insights, allowing them to foresee customers’ demands better, effectively manage risks, and deliver personalized services. In fact, with the global banking analytics market projected to hit $28.1 billion by 2031, the transformation is already underway.
Unlocking Insights, One Byte at a Time
Banks have always relied on data, gathering tons of it over the years. But with so much information, the real struggle is storing, processing, and turning it into something useful. Things get tricky in the process of making data actionable.
Until recently, retrieving most of the data acquired from these information swamps was a task. Now, advanced analytics has totally changed the game for banks. Now, banks can take raw data and turn it into insights.
This transformation is being driven by new-age technologies, including artificial intelligence (AI), machine learning (ML), and predictive analytics. Whether it’s about quickly assessing creditworthiness or creating personalized product offerings, these technologies enable banks to respond faster and smarter with better accuracy. Advanced analytics is bringing about an ongoing shift in banking.
Customer Experience: Personalized, Just for You
Gone are the days when banks sent out generic one-size-fits-all offers like ‘take a loan’ when all that a customer needed was better savings options. Well, not anymore. With advanced analytics, banks now have a clear view and understanding of their customers’ choices—how they spend, save, and their other financial aspirations. This wealth of insights enables banks to offer tailored services, moving toward a trend of hyper-personalization, wherein every offer and recommendation feels custom-made.
In fact, 71% of consumers want personalized services. And getting this right in banking can be a game-changer.
But here’s the real edge—advanced analytics doesn’t just predict what customers might want—it anticipates exactly when they’ll need it. Whether it’s sending a reminder before a bill is due or offering investment advice just as the balance grows, banks are stepping in with timely, relevant support.
AI to the Rescue
Fraud is on the rise with losses in the US reaching $10 billion in 2023—that’s a 14% jump in just one year. It’s a clear imperative: banks and customers need to step up their game.
Data/advanced analytics tools can be leveraged to combat these rising threats. These tools monitor transaction patterns in real time, flagging unusual activities before they lead to bigger vulnerabilities. But it doesn’t stop there—besides detecting existing fraud patterns— ML learns from past incidents to block suspicious transactions and evolves to tackle new threats easily. Furthermore, predictive ML models take risk management a step further by identifying potential risks before they occur. By analyzing historical data and market trends, these tools empower banks to identify potential vulnerabilities early and allows them to proactively implement preventative measures to minimize risk and ensure stability.
Operational Efficiency: Faster, Better, Smoother
Waiting on long holds with customer service representative is a thing of past. With AI and analytics, financial institutions are automating routine processes, such as compliance checks, loan processing, and customer support, resulting in drastically reduced waiting time. In fact, Gartner predicts that 80% of customer service and support organizations will employ AI by 2025 to enhance efficiency and deliver superior customer experience.
For instance, loan approvals that once took days or even weeks are now complete in a few hours. Thanks to analytics that use real-time data from many sources to determine creditworthiness. AI chatbots are also handling a high volume of client inquiries, resulting in quicker responses.
Regulatory Compliance: Data-driven Digital Trust
Customer trust is more delicate than ever, and banks are expected to protect their customer’s sensitive data while complying with regulations, such as GDPR in Europe and CCPA in the U.S. As data grows rapidly, staying compliant becomes tougher. But with AI/ML and smart analytics, banks can track compliance in real-time and identify risks like fraud, money laundering, or regulatory breaches before they become major problems.
These tools not only spot suspicious patterns within large datasets but also allow banks to act in a timely manner. Additionally, AI-powered algorithms help banks ensure fairness and accountability by bringing transparency and auditability in decision-making processes.
Innovation & Market Expansion: Opening Doors, Finding Dollars
AI/ML and data analytics are driving innovation in banking, helping banks grow into new markets by providing valuable insights into consumer behavior, market trends, and prospects. For instance, AI can assist banks in finding previously ignored patterns in underserved consumer categories or emerging regions.
Moreover, banks can identify and capitalize on new opportunities by monitoring customer behavior and market trends. In short, leveraging advanced analytics enables banks to not only better serve their existing customers but also identify new avenues for growth.
The Future of Banking
So, what does the future hold? As banks continue to embrace advanced analytics, the future looks bright and promising. Data will drive everything, helping banks understand their customers and markets with clarity. Soon, the distinction between conventional banking, fintech, and even big tech will blur, resulting in an ecosystem where data truly will be the new money. As we progress further into the digital age, the organizations that successfully leverage the new currency will thrive. The future of banking lies in data-driven innovation, creating a more efficient, secure and secure financial world.
(The author of the article is Sunil Pandita, Head of Business India, and South Asia, Newgen Software, and the views expressed in this article are his own)
