Analytics in Financial Services

Scott Lundstrom

GVP & GM IDC Financial Insights

IDC Snap Shot Market Intelligence, Research and Advisory

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• 1200+ analysts providing a global information community

• Coverage of 50+ countries around the world

• Almost 50 years experience analyzing IT and Communications end-

user and vendor markets

IIAR “Global Analyst Firm of the Year” 2012

World Wide Financial Services The Dynamics of 2013

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Macro Priorities

Optimize Capital

From balance sheet planning and performance, to liquidity management, to IT investments, capital optimization is king

Create Omni-channel Experience

A more consistent customer experience across all channels and a strong move to mobile

Renew IT Infrastructures

Legacy infrastructure continues to plague performance

Weather Economic Turbulence and Regulation

Find value in uneven markets and make compliance risk a predictable operating expense.

Exceed the expectations of current and targeted

customers

Continually streamline business processes to

achieve profitability, flexibility and adaptability

Maintain constant awareness using analytical

competencies of external and internal events and

risks to better shape strategic decisions and

tactical initiatives

Build in evolving local, country and regional

regulations

An Operational Vantage Point Continuing Global “Reality”

A New Platform for the New Reality

Big data, cloud, mobile and social technologies will continue to be at the forefront of discussions between IT and business professionals at financial institutions

Together, these technologies form the foundation of a "Third Platform", which will allow greater flexibility and agility

While some of these technologies are further down the maturity and adoption curve than others, all will be important components for driving value in 2013 and beyond

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Transformation is Happening Focus on the Desired Outcomes

The increase and sophistication of these disruptive technologies is highlighting the need for business model transformation in financial services

Leading this change is ultimately the consumer who is enabled by mobile technology to dictate when and how they will interact with the marketplace and business

This shift has profound implications for institutions in how they interact with customers, how employees deliver goods and services, and ultimately how IT

delivers services

Regulatory pressures in global business demands financial firms re-think value of the

technologies, data management, and business process used to operate effectively,

compete, and manage risk.

Convergence of intelligent devices, social business, pervasive broadband networking, and

analytics ushers in a new platform for building and servicing relationships between bankers,

customers, partners, and regulators

“Analytics” is the NEWEST Core. Increasingly vital to harness information - make data

actionable, optimized, timely, keep risks at anticipated and acceptable levels, and uncover

opportunities ahead of the competition

IT Reliability and Efficiency increases as risk factor. Age and complexity of systems,

lacking resources and skills for legacy systems , push to reduce costs and meet regulatory

requirements means additional outages, errors, and missteps.

Reality of ……….. Economic Instability and Financial Reform

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Business and IT Balancing Act Risk and Innovation

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Efficiency &

Effectiveness New Services & Revenue

Opportunities

Channels, Analytics, &

Customer Engagement

Regulation & Compliance

Innovation versus

Operation

Global Financial Services Information Technology Spend by Sector

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$USD Millions

Source: IDC Financial Insights Banking, Insurance, Capital Markets, Risk WW IT Spending Guide, Jan 2013

Overall 2013 IT Budget Outlook Brighter Than Recent Past

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Increase Decrease Stay the Same

Avg. increase = 11.4%

Avg. decrease = 3.6%

n= 68

US and WE respondents

Source: IDC 2013 CIO Sentiment Survey, Fall 2012

Q. In 2013, do you expect your total IT budget to increase, decrease or remain the same as 2012?

Please indicate the percentage change in your IT budget from 2012 to 2013.

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Business and Performance Management Models can exist in any one of these areas; they are different models in terms of data, methodology, delivery,

use and validation requirements. Diversity of models becomes a challenge, also making sure all models are

validated

Spatial Information

Analytics Tools

Content Analysis Tools

Business Intelligence Tools

Query, Reporting, and

Analysis Tools

Dashboards, production reporting,

OLAP, ad-hoc query

Advanced Analytics Tools

Data mining and statistics

Performance Management & Analytic Applications

Financial Performance

& Strategy Management

Budgeting, Planning, Consolidation,

Profitability, Performance

Management

CRM Analytic Applications

Sales -, Customer Service -,

Contact Center -, Marketing -, Web

Site Analytics

Credit Risk

Analytic Applications

Credit Analytics, Default Probability,

Loss Given Default

Investment Management

Analytic Applications

Portfolio Modeling,

Investment/Concentration Scenario

Modeling

Capital Optimization

Analytic Applications

Liquidity Risk, Asset Liability

Management

Operational Controls

Systems

Audit, GRC, SIEM

Data Warehouse

Event Discovery, Collection, Consolidation Layer

Common Infrastructure (compute, storage, networking, integration)

Fraud Management

AML, Payment Fraud, Insider

Financial Analysis, Risk Management, & (profitable)

Customer Acquisition Driving Risk Analytics Marketplace

N = 93

Source: IDC Global Technology and Industry Research Organization IT Survey, 2012

Q. What were the top 3 drivers for your organization to implement Business Intelligence/Analytics

solutions?

2.2

18.4

18.6

23.6

23.8

28.9

29.6

35.6

35.8

38.3

45.1

0 20 40 60

Other

Optimization of operations

Workforce optimization

Product or service innovation

Customer retention and service

Internal reporting and information sharing

Regulatory compliance requirements

Cost control or reduction

New customer acquisition

Risk management

Financial reporting and analysis

(%)

Attention is Therefore Turning to Analytics Most Impact To Business Units

0 5 10 15 20 25 30 35 40

Faster analysis (e.g. ability toevaluate more scenarios)

Faster access to information(i.e., faster query response times)

More accurate analysis

Ability to aggregate more data sources

Ability to aggregate structuredand unstructured data

Decrease in number of systems requiredto answer business questions

Other

CRO “the number of questions we’re being asked on both the tactical and analytic level has gone through the roof”

• Which of the following changes or improvements would you expect to have the most positive impact on your

organization or business unit (both business and IT)? Multiple responses accepted.

Q. What recognized benefits has your organization achieved as a result of implementing a Business

Intelligence/Analytics solution?

2.2

0.6

18.0

26.9

22.1

23.1

27.4

35.3

33.6

34.1

32.8

0 20 40

Other

Improved Workforce optimization

Improved risk management

Improved efficiency of financial reporting and analysis

Improved regulatory compliance process

Improved internal reporting and information sharing

Improved optimization of operations

Reduced costs

Improved customer retention and service

Improved new customer acquisition

Improved product or service innovation

(%)

N = 93

Source: IDC Global Technology and Industry Research Organization IT Survey, 2012

For those able to measure benefits, value in improved risk

management and financial analysis trails value in customer

acquisition and product innovation.

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Scott Lundstrom

GVP & GM

IDC Financial Insights

slundstrom@idc.com

p: 508-935-4767

IDC Financial Insights

www.idc-fi.com

IDC Financial Insights Community:

www.idc-insights-community.com/financial

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