Business insight in today’s data-rich financial services industry


The long-standing collaboration between Accenture, Avanade and Microsoft is helping the banking sector get to grips with analytics to improve performance. Cherie Rowlands reports.
The long-standing collaboration between Accenture, Avanade and Microsoft is helping the banking sector get to grips with analytics to improve performance. Cherie Rowlands reports.
Financial services organizations are seeking ways of generating revenue by acquiring new customers while at the same time increasing sales from their current customers. Understanding each customer in a single view of all interactions, personalizing offers to make them more relevant and enabling a streamlined customer experience across all channels, remain paramount as ways of increasing profitability, building loyalty and retaining customers. Step in the largest and most significant collaborative partnership for Accenture, Avanade and Microsoft, the three-company alliance delivering business and technology solutions – based on the Microsoft platform – to global industry-specific sectors including financial services.
Teaming together for more than a decade, Accenture and Microsoft founded business technology services firm Avanade in 2000. Since then the partnership has continued to strengthen its commitment to improving customers’ business performance through its complementary capabilities – Accenture’s industry knowledge and implementation experience, Avanade’s expertise in Microsoft technologies and Microsoft’s own enterprise-ready platforms and services.
Steve Palmer, senior vice president global data and analytics lead at Avanade, says: “The power of three combines Accenture’s deep industry expertise and management consulting with Microsoft’s total cost of ownership and ubiquitous presence in the financial services industry through its familiar technology applications and operating system. Avanade is the glue that makes these two things work together extremely well,” he says. “Microsoft Office and Windows are a profound part of financial institutions’ business processes; it’s quite natural that Microsoft is a big part of that. Accenture and Avanade together is the key for unlocking the power of the capabilities available in Microsoft technology.”
Jack Grey, global director for Microsoft Dynamics at Accenture, agrees that the omnipresence of Microsoft technology in the industry is a consistent component of the partnership and adds: “There has been a shift towards digital strategies in the financial services industry, following a demand from empowered customers for a seamless experience across multiple channels. This has been a huge disrupter for some organizations, made only worse by financial services being is a laggard industry,” he says. “Further, organizations must also consider that huge numbers of customers are switching financial institutions when they are dissatisfied with the experience or service they receive and are looking for better value from a competitor. This has provided a significant opportunity for our joined-up approach,” he says.
Peter Rist, worldwide alliance director at Microsoft, is emphatic that the alliance has what it takes to help its customers navigate their business requirements and challenges. “Accenture and Avanade run their own company-wide business applications on the Microsoft platform so have first-hand knowledge of our technologies,” he says. “This means both companies can apply insights from their internal deployments and operations to help clients around the world meet their business requirements. Microsoft also uses Accenture and Avanade services in managing a range of finance, accounting and procurement functions within its own organization. This combined knowledge and expertise of the alliance means we understand the issues that keep executives awake at night.”
Big data basics in banking
According to a recent Microsoft study, around half of IT decision makers across a range of sectors are finding data growth extremely challenging when managing their business intelligence (BI). Also rated as extremely challenging by 40% of the 280 companies surveyed, is integrating the BI tools needed to analyze data and glean insights.
The retail banking sector is no exception. Palmer says that while banks have improved the way they analyze transactional data in recent years – building offers and products that match customers’ product needs –they find bringing in new data streams more challenging in terms of allocating appropriate investment. “Banks struggle with the change in business case from a clear-cut expected return on investment (ROI) that is based on a defined result, to exploration. By definition, data mining is an exploration exercise, and it is often hard for organizations to get funding for such a project when they don’t know what the insight from analytics will reveal and therefore the potential action and cost of it that they will need to respond with,” says Palmer. “But the challenge is banks can’t justify launching products and initiatives the way they used to because by definition the outcome isn’t known until they go in and do the exploration.
“Many banks have brought in additional data streams and discovered something about their customer base that prompted an immediate change with a near-term result. But they didn’t know they were going to find a correlation and that it would work, until they found it. Banking has not traditionally been a space where ROI is speculative. However, if people can sell the business case and form budgets around an exploration process, that’s a good first step.”
Grey agrees that this starting point is pivotal for an organization wrestling with ways to gain customer insight and that once funding is found, providing analytics tools to the sales function is an effective way of scaling back customer attrition. “Sales advisers with these tools can use more detailed customer and product knowledge to have more targeted and relevant conversations with customers, maximizing their success in cross selling. Accenture’s seven-point guiding principles offer a way to get started. “When it comes to find a high-profile problem, follow the value and make sure you are aligned to your strategic objectives. Evolve support scenarios for clients to make better offers that tie them to your business. Attach those analytics to specific sales processes and embed them there.
“Focus on fostering an analytics culture within the company so that it’s not something unto itself and really embed that across the whole organization. Don’t be discouraged by lack of data – we’ll get there. Banks have been putting information into customer relationship management (CRM) and enterprise resource planning systems for years and years, so in most cases it’s there. It’s just a matter of getting at it and then doing something effective with it.”
But according to Microsoft’s financial services business analytics expert, there is a more fundamental challenge within the industry that is holding banks back: confusion over what big data is. Colin Kerr, director, worldwide banking at Microsoft, explains: “For some, it’s about how they interpret data from the social media world – what people are saying about them on Twitter, Facebook or other external feeds– but for others it is simply about large amounts of traditional, structured data that must be stored for at least seven years. We have to address both,” says Kerr. “It is essential to not only locate the information you need, but to use it in a way that benefits the business directly. If we think about a big haystack with a needle in it somewhere, you can put in a data solution to identify that needle. But the next question is, so what? What is the value of that nugget of information and how do you use it to help your business grow?”
Banking benefits
One of the ways BI tools can help banks is in managing operational and credit risk, according to Kerr. “With Basel III, a bank has to withhold a certain amount of its capital in reserve – if it isn’t able to accurately calculate what that means it runs the risk of one of two scenarios,” he explains. “It either holds back too much in terms of reserves, meaning it’s not running nearly as efficiently, or it doesn’t hold enough back, which means it’s likely to get a large fine from the regulator. This could result in operational problems if we enter another banking crisis. Trying to accurately maintain those adequacy requirements or the level of credit risk exposure around the world is absolutely vital and the right BI tools can help.”
Kerr cites Microsoft’s own Treasury Group as an example of how analyzing data in a meaningful way directly impacts a bank’s financial performance: “Treasury operates a bit like a bank for Microsoft,” he says. “Essentially the corporate function funds the daily business operations of the company in more than 250 countries and around 85 currencies. One of the crucial things it has achieved in the past two years is to understand at a very low level of detail exactly how much cash is located in each of our banking partners by both currency and country. You would think most global businesses would know that but they don’t. Many companies have very little insight into exactly where their funds are located around the world. Yet this is useful to know about countries such as Egypt, where the risk of being overexposed to political instability may affect the financial operation. Treasury is now able to make these decisions very accurately.”
Banks also have their own treasury departments, but there’s an additional opportunity for a bank solution such as this: they can take the solution and offer it to their own corporate customers. “Microsoft Power BI for Office 365 – including Power Map, which explores geospatial data and Power View, which combines data, charts and graphs into a single dynamic view – can help by transforming complex data into insights that can be shared between teams across the globe. We’re seeing massive interest from global corporate transaction banks offering a similar solution to their customers as well.”
Apart from knowing where their cash is located, one of the biggest areas for banks wanting to get ahead of competition is customer and product analytics. “Beyond CRM, demographic-based information about product usage, pricing and what people are saying about these on Twitter, can reveal if a business is creating the right kind of products,” says Kerr. “Are they complaining about them – is that real or manipulated – and is there a correlation between product profitability and the sentiment seen on social media about some parts of the bank? It’s all about pulling those things together to increase profitability from banking products – whether savings products, loans or a mortgage – to ensure you’re accurately tailoring the right product to the right customers in the right segment.”
The possibilities also extend to the role of the branch as a kind of matchmaker between its commercial and personal customers. This can improve the relationship with clients in a way that can prevent them switching financial providers. “For example, banks may partner with digital marketing companies to gain insight into the restaurants customers have visited, allowing them to promote an offer with another local business in order to improve customer loyalty,” explains Kerr. “Rather than trying to exert control over the experience, why not deliver the best value possible to the customer so they want to stay?
“Banks are also looking to optimize their branch footprints in a way that is more than a profitability exercise. They’re considering whether they need a new branch in a in a specific location – or need to close one. Discovering how many customers in that branch are using mobile or online banking is one way of helping to make that decision. If few customers visit the branch because they are using digital channels anyway, the impact of closing the branch won’t be as great. Banks can also use analytics to discover how else these customers are profitable in other areas and therefore how they can be migrated to other channels. It’s about factoring all these things together.”
Tap into in-house tools
Banks keen to gain such powerful insights from their data first need to look at the capabilities of their current BI solutions, says Palmer. “Banks need to look at the capabilities in Excel, in particular. Its power as a data mining, data exploration and advanced analytics tool is significant and underestimated,” he says. “People buy technology as a silver-bullet answer, but if you accept that there are around a billion copies of Office used globally, in Excel people mostly already have what they need to achieve a lot of the benefit.”
Kerr agrees: “Finance organizations that can draw from the gamut of tools available to them in Excel will be well placed to gain from delivering relevant products to their customers in a cost-effective way,” he says. “Banks that best manage data are the ones that will become the most operationally efficient, and will be able to better manage their risk and deliver the right products, to the right customers, via the right channel, at the right time.” In addition, another advantage of self-service BI is that it enables business users to create the views they wish to see without needing to involve the IT department. But banks need to provide the right people with the right tools to do their jobs, believes Kerr. IT will still maintain control and governance of data, and strategically deploy the data systems in ways that allow a transfer of control over data insights to business operations or decision makers.
“To achieve that we provide the data management and storage layer within Microsoft SQL Server, fully integrated with reporting and analytics services, to extract the necessary information. Then we provide the visualization layer that delivers self-service BI through Office products such as Excel,” Kerr explains. “Another aspect is storage. With such rapid growth in data, on premise storage in data centers becomes challenging. This is where Microsoft’s cloud platform Windows Azure provides value by enabling the storage of data in the cloud, reducing costs to the bank. Financial institutions can still gain the analytics and insights they need by implementing a parallel data warehouse. SQL Server Parallel Data Warehouse (PDW) analyses huge volumes of data whether it’s stored in the cloud or on premise. PDW can process data from both sources and offers an integrated view of that same visualization layer in Excel. From a BI-user perspective, Excel is the tool everyone is familiar with, but it’s now also your BI and analytics dashboard. This is why we’ve made such an investment in its future. There are many solutions out there, but almost everybody defaults back to Excel at some point.”
But despite these advances in BI tools, Accenture, Avanade and Microsoft are continuing to be called upon to help organizations with core data management and quality issues. “We tend to work with many of the largest banks that have grown in recent years through acquisitions or consolidations,” Palmer explains. “And where you had three, four or five retail banks in the past – they is now one. But the individual systems each bank used to run don’t just go away. So how do these organizations achieve a 360-degree view of all the relationships a particular customer has across the institution, across all products and service lines, when they have multiple, disparate systems? Forget about applying social media streams and sentiment analysis – you can’t even get to that point.
“We’re still spending a lot of time trying to help people solve their core data management and data quality issues. It’s about trying to get the core data right. How do you correlate the social, mobile, analytics and cloud context if you can’t get a single view of all the products and services that an individual customer enjoys from your organization? The need to coordinate social, mobile, analytics and cloud offers real value to the business. Social media provides the means for reaching large numbers of consumers promptly, while mobile technology joins the bank with its consumers. Analytics allows insight into their purchasing behavior and the cloud enables a more efficient and affordable way of managing the vast amounts of data that banks hold.
But if you’re still struggling on the backend to have data integration across all your products and services, while you’ve still got data quality issues, the old rules still apply here – rubbish in, rubbish out.”
A predictive future
Increasing service offerings through end-to-end customer-centric solutions is a firm focus for the alliance which will be looking at new sources of data to diversify the way in which banking marketing integrates other industries
Resolving the fundamentals of data analytics for its customers has not stopped the Accenture-Avanade-Microsoft alliance keeping its eye on future innovation. The partnership is establishing a managed-service approach to analytics and investing in building an analytics solution that includes data acquisition and an authentic end-to-end solution. Palmer says: “We’re beginning by acquiring the data from various sources, manipulating it to re-shape it in the right way, applying data scientists to mine and explore that data and find new correlations, building the necessary predictive models and bringing those answers back. Then we will be delivering them in a wide variety of consumer experiences whether on the desktop, mobile devices or in branches.”
In doing so, the partnership is focused on social, mobile, analytics and cloud from the bank customer’s perspective. Grey continues: “That is embodied in our customer-centric approach – serving them and anticipating their needs. Obviously analytics is at the foundation of that, by maximizing the number of contacts and the overall value that we have or share from clients across the board.
“In banking, this is widely known as house holding – gaining insight into a customer with a view to cross selling to those surrounding them, such as family members. We are focusing on a few key areas as clients continue to shift to digital. We are giving them control over their experience to some extent, allowing them to help themselves through enabling client facing portals for self service, using the technologies Microsoft has acquired over the past few months to get to know these clients everywhere they exist in ways that make sense to them.”
Acquiring data from a variety of sources, bringing that together and applying the functional data scientists – with the right industry acumen focusing on outcomes to customers – will continue to increase as a service, not least because there is a global shortage of data scientists, Palmer believes. “The largest benefit in analytics is going to be around predictive – the big banks are already solving some of these problems because they have the capital to do it, but for this to be a broad-based industry norm, it requires a service-based analytics approach,” he says. “We’re looking at ways to use new sources of data in a way that previously hasn’t been used and also to diversify the way in which banking marketing integrates through social media and big data feeds with other industries. Wouldn’t it be interesting if a big-box retailer was able to gain insight from these channels and begin pushing offers directly to the bank customer person on their phone?”
With its dedication to developing and delivering both sound advice and ongoing solutions across the entire financial services sector, the power of three is in it for the long haul.
“Our partnership continues its commitment to developing and progressing initiatives that help all financial services companies to transform and enhance their business models, technology, talent resources and customer relationships,” says Rist. “We’ll strive to ensure that our combined expertise will not only create a competitive advantage for them, but, just as importantly, that the results achieved are sustainable too.”
On Windows.