By Naren Vijay
Business intelligence and data analytics are integral to the Banking, Financial Services, and Insurance (BFSI) industry. The increasing pace of digitisation in the BFSI industry and improved business intelligence and analytics capabilities have opened several new avenues for business growth. Business intelligence and analytics have played an essential role in the evolution of fintech over the past decade worldwide.
Before completing the digital transformation curve, a BFSI business can either struggle with collecting meaningful data at various touchpoints or leverage the data effectively. However, modern technologies like artificial intelligence and machine learning have been an essential part of the digital transformation journey.
The use of big data analytics in the BFSI sector is expected to touch US$ 86.69 billion by 2027, growing at a CAGR of 27.7%. Integrating business intelligence and analytics can accelerate the digital transformation curve of a BFSI business.
Business intelligence for Customer 360-degree profiling
BFSI businesses must understand customer profiles well. The use of business analytics help in conducting 360-degree profiling of the customer. With demographical insights by gender, tenure, location, age group etc, a business is better positioned to build a superior customer experience and launch targeted products. At the same time, customer profiling can also help derive useful insights like savings account opening and closing trends, accounts and transactional insights by circle, region, and branches, zero balance/transaction accounts, closed account analysis by tenure with the bank, as well as transaction analysis and potential customers for various types of loans.
Business analytics in the BFSI industry
Business analytics helps financial institutions with much-needed insights into existing and potential customers across various loan portfolios. It includes insights like customer transactional trends, increasing customer lifetime value, reducing customer churn, and targeting potential customers for new loans. The analytics can also help with recovery insights, interest rate insights, account ageing analysis, customer categorisation, geographical distribution and quarterly loan trends. In other words, business analytics empowers a financial institution with insights that help them to create better products and experiences for existing and potential customers.
Benefits of business intelligence and data analytics in the BFSI sector
Their use of business intelligence and data analytics is more important in the BFSI sector because its success relies on the effective utilisation of data. Here are some of the benefits of using business intelligence and data analytics in the BFSI sector:
Better customer retention policies
Business intelligence and data analytics allow a financial institution to create better customer retention policies. With a better understanding of their usage, patterns and transactions, an organisation can offer a better experience to the customer. For instance, customers with a high credit score and an increased usage of the credit card limit can be asked to enhance their credit card limit with the use of business analytics.
Understand customer transaction patterns
Analytics can help uncover patterns and trends in customer transactions. These insights can be useful in understanding macro and micro trends. A better understanding of customer transaction patterns can help an organisation build a hyper-personalised approach and provide a personalised and tailored experience to the customer.
Improved loan recovery rates
Apart from building a superior and personalised customer experience, analytics helps a business improve the performance of business operations. For instance, analytics and business intelligence can drive improved loan recovery rates in an organisation. With the right distribution strategy by age, geography, occupation and branches, a business can diversify its risk in the loan allocation process. At the same time, recovery insights help understand the potential areas to be focused on for improved loan recovery rates of various loans granted across different product portfolios.
Identification of potential customers for various products
The use of business intelligence and analytics help an organisation identify potential customers for various BFSI products. For instance, analysing the existing user base can help identify potential customers for several other organisation products. It helps increase the lifetime value of the customers. Similarly, business analytics can be used by BFSI businesses to identify new customers and drive profitability in an organisation.
Integrating analytics and business intelligence allows a BFSI business to engage existing and potential customers more effectively. The sophisticated capabilities of business intelligence software can help an organisation improve its operational efficiency, reduce risk and increase profitability.
(The author is EVP – Growth, Lumenore. Views are personal.)