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By- Alok Bansal
Data is the new science and driving force for every industry’s growth, financial institutions being one of it. Banking industry has incorporated the traits that were once limited just to Fintech segment like data and analytics. Over the last couple of years, the spurt of big data has opened up enormous opportunities for the banking sector to grow. Data is seen as the most valuable asset to successfully stabilize the overall evolving banking environment.
Looking at the tremendous impact of analytics and the way it has completely transformed the banking functions, it should be considered an important part of every initiative.Let’s explore some key banking analytics trends to look forward in 2020.
Better Personalisation With Rich Data
Until a few years ago, banking initiatives targeted demographic based clusters like young and older people but many banks are now targeting customers based on their values, aspirations, lifestyles and mindsets. This ultimate switch in the level of personalisation saw a tremendous growth in 2019. In 2020, this trend will further escalate with many banks developing individualised banking experiences for its customers which is an ultimate level of personalisation allowed through data and advanced analytics.
What makes this level of personalisation achievable? It involves clustering a customer base with advanced criteria, where human centric, design thinking pillars and CRM tools help banks and financial institutions match customer needs to real time solutions. The banking industry has already incorporated numerous measures to offer higher standard personalisation to its users. Looking at the efforts and innovation, it is expected to come up with a powerful personalised experience by using the existing data in 2020.
The Growth Prospect of Open Banking
Open banking is an incredible aspect of financial services that has taken the banking sector by storm. The trend of secure data sharing (through APIs)with third parties to power new financial services has given greater freedom and control to consumers in how they interact with their financial service providers.Around the world, the industry is starting to recognize the potential of Open Banking and the way it is redefining the financial landscape by helping financial services providers enhance service offerings and improve overall customer engagement.
With more and more regulatory bodies requiring the banks to enable customers to share their data securely with third parties, a lot of technological innovations and expansion is expected to be in store for open banking and there is no reason to think that it is going to subside anytime soon.
With the high cost of a physical branch network and increasing number of customers switching to digital channels, digital only banking entities are growing rapidly. While some financial institutions are launching digital only banks to collect deposits, others are using digital platforms to provide lending, investing and specialty services. In either of the cases, focus is constant i.e. innovative customer experience and increased value to the consumer, supported by customer data and advanced analytics.
Similar to retail industry, cost of alternative forms of delivery and consumer expectations, are redefining the way the banking industry is structured.
More and more banking organisations are expected to move to digital only banking in 2020 both to protect their customer base and expand their market share, empowered through open banking APIs and cloud technologies. The only challenge will be in determining the right mix of physical and digital.
AI Driven Predictive Banking
One of the most innovative and interesting banking trends of 2020 will be the continued movement to predictive banking. It is for the first time that banking industry can consolidate internal and external customer data, that is rich and financially viable, not only to know their customers but also build their predictive profiles. With the enhanced use of data, financial institutions will provide consumers with value driven services through next best actions instead of blind selling of products.
Payments infrastructure will always remain the most dynamic area of innovation in the banking industry. Driven by dynamic consumer expectations and technological changes, innovations in payments industry will persist. Accounting to the continued evolvement of payments infrastructure, technology is expected to move it from a series of specific products to part of everything consumers do. The driving force behind the differentiation will be data and technology, changing the dynamics of payments.
Incorporation of Advanced Analytics
Customer retention and fraud prevention are one of the top priorities of banking organisations. 2020 will witness the banks incorporating machine learning algorithm into their system for its predictive abilities. This will give real time information to the banks about customers who are considering changing their service provider. Additionally, banks will use data science to minimise frauds and money laundering by lending to those who adhere to regulatory norms.
The future challenge is to develop analytic strengths that span the organisation and not just areas of expertise. Additionally, the next step would be to harness both external and internal data from structured and unstructured sources.
The author is MD and Country Head at Visionet India.