How Data Fuels Banking’s Digital TransformationData is the crude oil of the digital economy. When refined with predictive analytics and modeling techniques, data can power personalized offers that boost customer loyalty, create upsell and cross-sell opportunities, and generate greater share of wallet.

2 KEEP CHALLENGING February 2016

Digital is reconfiguring the world. From

the advent of the commercial Internet,

technology advancements have made our

day-to-day lives more virtual and global.

Smart, always-connected devices and

anytime/anywhere communications and

interactions are now a given, particularly

among millennials, who expect such

conveniences in their banking and financial

services relationships.

Data underpins digital’s disruptive promise.

Combined with predictive analytics, hardware

and connectivity, data opens the door to

breakthrough insights through Code Halo™

thinking, which uses the digital persona of

customers to develop new offerings, guide

them to relevant and enabling information,

improve service and anticipate future customer

needs.1

An example is JPMorgan Chase & Co., which

analyzed 12.4 billion debit and credit card

transactions to explore the factors shaping local

consumer commerce. The research revealed a

dramatic slowdown in the growth of everyday

consumer spending from 2014 to 2015, a

valuable insight for shaping financial services

strategies and offerings.2

Companies large and small can gain distinct

advantage by using analytics to look at the

same data as their competitors do, in order

to uncover new patterns and insights. They

can then develop differentiating business

propositions that lead to disruptive products

and services. Consumers can also get into

the insights game by selling their anonymous

data through Datacoup, which analyzes it

and provides the insights to companies.3

Data provides not only customer intelligence

but also insights into the workforce. Credit

Suisse Group and Walmart Stores, Inc. are

among the companies that are analyzing

factors such as job tenure, performance

reviews and communication patterns to

identify employees with a high likelihood of

leaving for another job.4

More Tailored Offerings Across industries, organizations have always

collected and stored data on customers,

suppliers, products and services. Today,

traditional enterprise and market data is being

combined with big data (i.e., interactional

data) and third-party-supplied data that, for

example, adds demographic and geospatial

inputs. In addition, an emerging trend is

the push for “fast” data – making the most

pertinent information available in real time at

the point of engagement or interaction.

Using smart algorithms, analytical tools and

frameworks, businesses can uncover insights

from these disparate data sources, providing

the basis for action. When a large global bank

built a “propensity to save” model to predict

customer interest in savings-related offerings

and increase cross-selling, for example, the

model pilot produced a tenfold increase in

branch sales and 200% growth in conversion

rate over a two-month period.

HOW DATA FUELS BANKING’S DIGITAL TRANSFORMATION 3

Uncovering the meaning in data patterns sets

the stage for conducting predictive analytics.

The ability to influence behavior in a way that

it becomes predictable or can be anticipated

before it happens can inform the development

and configuration of products and services.

Like Facebook and

Google, financial

institutions can

create constructs

that tap the

i m a g i n a t i o n

of millions of

people, leveraging

the power of

information, algorithms and technologies to create

contextualized and personalized experiences.

Data can help point the way to decisions and

actions in various situations, such as pitching a

particular product to a customer at a certain time

in a specific contextual situation.

A pioneering global financial services company

harnessed the anonymous transactional data

of its charge card customers and developed

personas based on their buying habits and

interests. In partnership with merchants,

the company feeds the real-time analytics

into dynamic predictive models and pairs it

with geolocation and mobile data to create

merchant-funded personalized offers to

customers.

In-market signals can help drive bank strategies,

too. Within data privacy limitations, an institution

can comb the Web, the social Web, apps and

other online and offline data sources for

information, such as who is browsing for a home

or car. Mapping this group to its customer base,

the bank can make targeted offers to customers

who could be in the home or auto market in the

next 30 to 90 days.

Armed with this information, the institution

can work proactively to not only offer the right

financial product at the right time in the right

place, but also reinforce customer loyalty by

delivering a meaningful experience. Taking a

“next best action” – presenting a compelling

offering even if the customer hasn’t asked

for it – can lead to additional upsell and cross-

sell opportunities that fuel greater wallet and

market share.

In addition to uncovering what customers

want, data and analytics can help determine

whether a financial services provider wants

an individual or organization as a customer.

Lending Club, for example, looks at diverse

factors when it assesses whether a customer

is risk-worthy, including how fast and at what

time of day loan seekers fill out an online

application and the makeup of their social

media friends list.5

Contending with Data’s Dark Side

When fraud occurs, a bank can expect to put

considerable effort and resources into bringing

the perpetrators to justice and recovering the

funds, sometimes to no avail. Predicting and

preventing fraud — rather than acting after it

happens — can potentially mean big savings for

The ability to

influence behavior in

a way that it becomes

predictable can inform

the development

and configuration of

products and services.

a bank. Leveraging the power of data and using

the right tools, analytics and algorithms, banks

can do just that in some situations. HSBC has

improved fraud detection, false positive rates

and fraud case handling by monitoring the use

of millions of cards in the U.S.

Fraud can be attempted from both inside

and outside the institution. To address the

internal threats, a bank can establish data and

algorithmic mechanisms to monitor employees’

on-the-job activities for compliance with its

code of conduct, policies and procedures.

Steps to Capture the Power of Data

Banks can take several actions to capitalize on

the wealth of data available to them:

• Use data to support high-impact, top-down

initiatives that drive change, break down

silos, create more information-sharing and

ultimately evolve to “capture one and done.”

• Enhance data management and decision-

making by investing in smart algorithms,

predictive analytics and advanced tools,

such as speech analytics.

• Explore organizational redesign and new

operating models, including establishing

or strengthening the role of the chief data

officer.

• Strengthen the organization’s data science

proficiencies and commit to creating a data

scientist function. Such a function could be

filled by a team of behavioral scientists who

can help convert raw data to information,

insights and foresights that inform next-best-

action activities and strategies.

Data’s Vast Opportunities

Banks are uniquely positioned to apply Code

Halo thinking because they already own data on

enormous numbers of transactions and track

the money movements of their customers. This

powerful advantage can help create an institu-

tion for the future by leveraging data’s power

through the application of smart algorithms

and predictive analytics. This will enable a bank

to quickly and effectively transition from just

“doing digital” to being a digital organization.

For more on this topic, please view our video

https://www.youtube.com/watch?v=MZicWFx5H_k

4 KEEP CHALLENGING February 2016

About the Author

Footnotes

Prasad Chintamaneni is President of Banking and Financial Services, leading Cognizant’s largest industry business unit globally. As global lead since 2011, he is responsible for the business unit’s global P&L, including sales, business development, consulting, client relationship management and delivery. Prasad joined Cognizant in 1999 and established key relationships with many of the company’s largest banking and financial services clients, while leading the U.S. Eastern Region Banking and Financial Services Practice through

2006. Prior to joining Cognizant, he spent seven years in investment banking and financial services, including the last five years with Merrill Lynch as an investment banker and as a member of Merrill’s business strategy committee in India. He earned his postgraduate diploma in business management from XLRI School of Management in India, following his bachelor of technology degree in chemical engineering from the Indian Institute of Technology, Kanpur, India. He can be reached at cprasad@cognizant.com.

HOW DATA FUELS BANKING’S DIGITAL TRANSFORMATION 5

1 Code Halos are the digital information that surrounds people, organizations and devices. By making meaning from this data, businesses can create unprecedented insights and improve their competitive edge. For more on Code Halos, see our website, https://latestthinking.cognizant.com/code-halos.

2 “Profiles of Local Consumer Commerce,” JPMorgan Chase & Co., December 2015, https://www.jpmorganchase.com/corporate/institute/document/jpmc-institute-local-commerce-report.pdf.

3 Datacoup website: https://datacoup.com/.

4 Rachel Emma Silverman and Nikki Waller, “The Algorithm That Tells the Boss Who Might Quit,” The Wall Street Journal, March 13, 2015, http://www.wsj.com/articles/the-algorithm-that-tells-the-boss-who-might-quit-1426287935.

5 Jonathan Marino, “Here’s How Online Lenders Figure Out Whether You’re a Good Borrower,” Business Insider, Oct. 20, 2015, http://www.businessinsider.in/Heres-how-online-lenders-figure-out-whether-youre-a-good-borrower/articleshow/49473967.cms?r=US&IR=T

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