Charm and bread earner of the $60 billion Indian IT industry?the banking, financial services and insurance (BFSI) sector is keenly looking at deeper adoption of analytics and business intelligence. As the trend picks up, Aubrey Corda, director, financial services sector, IBM India/South Asia feels that the conventional approach with analytics has been focused on collecting data, storing data in a database, and doing data mining. While that?s worked well in the past, this approach is becoming less and less effective as the volume of data explodes and the pace of change accelerates in financial markets. In a recent interaction with Diksha Dutta, he discusses the relevance of analytics in banking, successful examples of overseas and the future trends in the sector. Excerpts:

Money today has been reduced to zeros and ones. It?s intangible and invisible information. How can the banks intelligently manage this information?

Consumers today want to bank anywhere, anytime with the convenience of using their smartphones and iPads at their fingertips. As we move towards a cashless society, the future of banking will be shaped by how the physical and virtual worlds of banking converge. Today, banks need to evaluate the use of smarter banking solutions to manage the disconnect and complexity between an interconnected global financial services ecosystem and the need to analyse rich and varied information sets in real-time.

There are three imperatives that are going to force financial institutions to think and act in fundamentally new ways. The first one is re-thinking and innovating the business model. The second is developing new intelligence that enables financial institutions make informed judgments and become much more client centric. The third and final imperative is the need to integrate various types of risk into an overall integrated risk management framework. As more and more intelligence is being infused into the way the world works, including our financial systems, unprecedented computing power and advanced analytics can turn oceans of ones and zeros into insights, in real time.

How can banks harness analytics to effectively target customers?

Smarter banks will increasingly invest in customer analytics to gain new customer insights and effectively segment their clients. This will help them determine pricing, new products and services, the right customer approaches and marketing methods, which channels customers are most likely to use and how likely customers are to change providers or have more than one provider.

Utilising predictive analytics, or the ability to predict trends and behaviour patterns from data, our customers are now increasingly better able to manage their businesses. For instance, the First Tennessee Bank, one of the top commercial bank in the US, increased its return on investment by 600%.

Consider this?to reduce fraud, Infinity Property and Casualty Corp cut referral time from 14 days to less than 24 hours on special investigation claims and identified and addressed subrogation claims at twice the speed?from 26 to 10 days. Similarly, Banco Espirito Santo improved retention of high net worth customers, resulting in a 10-12% increase in the bank?s overall profits. Standard Life improved their marketing campaign results with a 9x increase in response rate and secured ?33 million of mortgage application revenue in a single campaign.

How different is the analytics adoption by banks now, as to what it was few years ago?

When banks analyse the flow of markets, they can turn that into intelligence, leveraging information, science and decision making. The conventional approach with analytics has been focused on collecting data, storing data in a database, and doing data mining. While that?s worked well in the past, this approach is becoming less and less effective as the volume of data explodes and the pace of change accelerates in financial markets.

Tell us about your Smarter Banking initiative and smarter banking solutions?

Over the last 18 months, financial institutions around the world have turned to IBM to become more viable in the new economy. The fact that so many banks are doubling-down on their investments in technology is a healthy sign of recovery?and an important indicator of better times ahead. Our Smarter Banking initiative is all about the optimal use of analytics in banks to help develop new intelligence that enables banks to make informed judgments and be more client-centric and focused on the opportunities in advance. A business analytics and optimisation study recently conducted by IBM showed that nearly half of the financial services executives believe they do not have the right kind of information required to do their job. Smarter banks will increasingly invest in customer analytics to gain new customer insights and effectively segment their clients.

In addition to alert modeling and analytics, other services and solutions IBM offers focus on areas such as cloud computing for financial services, compliance information life cycle management, IT security infrastructure solutions, mobile banking and stream computing for financial services among others.

How can banks CEOs address the issue of complexity?

The traditional approach for addressing complexity has been to do one of two things: one, deconstruct this problem into lines of business /channels/and customer segments and try and optimise each one of them using a portfolio approach. And looking at business process reengineering to connect the dots between these various silos. But neither of those approaches fully gets the job done. What CEOs really have to do is to sit down and figure out as to what are the most important processes and services that make up the building blocks of my bank? By focusing on the key building blocks?and essentially pursuing a strategy of specialisation?banks can benefit much in the same way, as well shave off cost and complexity with more precision in the process.

Why is risk management is critical in banking transformation?

The global financial crisis has brought risk management squarely back into the radar. As of the end of 2009, there are about 4,000 new regulations being considered worldwide across 200 countries. And if each one of those regulations were implemented discretely, financial institutions will end up spending tens of billions of dollars cumulatively on compliance. This shows that the need to think about risk in an integrated fashion is really upon us right now.

Historically, banks? risk management techniques have been implemented in silos aligned along individual lines of business. These silos hinder an essential enterprise-wide view of risk. Banks should move toward an integrated risk management framework that transcends silos and cohesively addresses financial risk, compliance and governance, and fraud and financial crimes.