Data and Analytics in Banking 4.0: The key differentiators

Swaminathan Srinivasan

The ‘Banking Everywhere, Never at a Bank’ mantra popularized by Brett King defines banking for the new age succinctly. From frictionless financial services which are fully integrated into digital processes to enabling entirely new business models, Banking 4.0 is radically transforming the banking sector, by enabling the delivery of the same set of services in a customer-centric way.

The 4.0-pronged challenge

Traditional banks have been supporting a large number of branches, staff and expensive legacy systems for years – decades even, in some cases. These systems, while robust, put a limit on taking advantage of latest developments in technology. Financial Institutions have to change their operational structure to increase the accessibility of financial services. A research published by Ernst and Young cites the following as reasons for customers to look for fintech upstarts instead of traditional banks:

  • Easy account opening (43.3%)
  • More attractive rates/costs (15.4%)
  • Access to newer products and services (12.4%)
  • Better online experience (11.2%)
  • Better service quality (10.3%)

The survey also lists preference to use traditional financial service providers because of trust as a major reason not to opt for fintech start-ups. How can traditional banks leverage this considerable advantage and drive their banking 4.0 transformation?

Also Read: A Shifting Landscape – The rise of the ‘TechFins’

Banking on technology

Modern day banks can score a march over their fintech rivals by quickly addressing aspects that drive differentiation, while raising their own levels of service to their customers. Here are a few:

  • Hyper Personalized Service – Moving away from a product based paradigm to the services paradigm, banks can easily provide them at a customer and transaction level detail.
  • Innovative Partnerships – Identifying partnerships within the ecosystem can help in being relevant to the current generation’s needs, and allows for easy transitioning towards millennial preferences and new market priorities.
  • Managing Strategic Risk – While risk in the banking parlance always had a traditional approach, it can be managed with better insights by using data and analytics.
  • Creating New Synergies – Banks can shape products and services in such a way that will create new synergies and increase value for customers in a big way.

In order to explore these opportunities, the first step banks have to take is upgrading the infrastructure. Having the ability to serve customers at all points can be achieved easily with adoption to cloud and other highly secure process changes. Using Artificial intelligence in aspects that involve data and analytics in banking can help in creating intuitive processes and solutions.

The critical role of Data and Analytics in Banking 4.0

The quantity of data in banking, collated over years of relationships with customers, is massive. Add to the fact that people turn to banks for the majority of the important life decisions and one cannot overstate their importance.

In this era of banking 4.0 financial institutions can create a 360-degree customer view by assimilating data from different sources, use them in association with the collected data from banking records, and push the right products at the right time at an optimal cost. This level of hyper-personalization is not just about selling new products but actually improving service, reducing charges and optimizing the experience for customers. This is possible by using AI in areas like customer service and driving RPA and process mining.

Data and analytics provide key insights into customer preferences – from e-commerce platform choices to which payment methods that customers prefer among other things. This enables innovative partnerships, like the ones where traditional banks partner with e-commerce sites to enable co-branded offerings.

In the Banking 4.0 paradigm, the traditional management of risk would have to undergo a change due to data and analytics driving the management of credit risk at much higher levels of accuracy. Apart from vastly improved fraud detection mechanisms.

Creation of new synergies with the help of data and analytics in banking can be clearly seen in the field of payments. The ability to bring together the customer and the merchants on the same platform has been the single big success of the modern day payment providers. Banks have the ability to up the game if they can provide key insights to both the customer and supplier using their unique vantage point in the transaction chain. While regulatory issues and data privacy might be a hindrance, the ability of banks to play a key role here is not far away.

Maveric Systems, being a banking technology transformation specialist, has been helping global tier 1 banks, regional banking leaders and fintech community with wide range of data transformation services such as data migration, data for digital, data for compliance, data lakes, visual analytics etc. We bring best of breed data technologies coupled with people expertise and our inherent banking domain strengths to augment the values of precise decisions. This is the way we #AccelerateNext banking transformation journeys.

Examining the road ahead

Building digital-first experiences is critically important for banks to embrace the new customer. Providing them with that omnichannel experience also has the effect of banking becoming a secondary activity – something that people don’t think twice about. When paying for groceries is simpler than sending a text, people would prefer providers that give them such an experience.

Also Read: How to approach Financial Investment amid Pandemic

The role of Data and Analytics and building the right AI infrastructure within banks is crucial for them in this journey. The time has come for traditional banks to embrace this approach and look at this journey more from a holistic Banking 4.0 perspective.

Technology partners with sufficient pedigree in financial technologies can simplify a lot of legacy processes, while adding on functionalities to slowly introduce Banking 4.0 features and become true partners in success.

Views expressed in this article are the personal opinion of Swaminathan Srinivasan – Senior Vice President of Data and Analytics Business Unit at Maveric Systems.


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