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Business Analytics and Data Warehousing Business Analytics as a concept has come a long way, from being a novelty to a norm today Suresh Kumar Financial Services Asia Pacific Oracle Corporation Agenda Market Assessment Business Analytics in Banking Trends In Banking

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Business Analytics and Data Warehousing

Business Analytics as a concept has come a long way, from being a novelty to a norm today

Suresh Kumar

Financial Services Asia Pacific

Oracle Corporation


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Agenda

  • Market Assessment

  • Business Analytics in Banking

  • Trends In Banking

  • Business Requirement in Banking

  • Oracle Business Analytics Solution

  • What Are Analysts Saying

  • Summary


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High cost of maintaining highly customized older technology– many organisations looking to replace core systems

Fragmented data – difficult to understand profitability of customers, products and channels

Lack of automation to support key Banking processes, eg: loan origination, transparency and accountability enabling regulatory reporting/tracking

Consistency of service across channels and improve cross selling

To service current business needs through an adaptive IT architecture

To manage human capital and internal knowledge

Market Assessment: BankingKey Business Drivers & Challenges facing the Banking Industry:

Business Drivers

Business Challenges

  • Customer Insight – understand customers better, improve interactions and responsiveness, offer multiple channels

  • Operations transformation of legacy systems to improve process efficiencies

  • Corporate Governance – integrate Risk Management in day-to-day operations and performance management.

  • Reduce back office costs through shared service centers, automation of processes

  • Regulatory compliance requirements

  • Managing human capital for increased competitiveness


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Business Analytics in Banking2nd Time Around

  • Business Intelligence “Failure”

    • Prior limited success of BI-DWH were not just technology problems, IT was only one of the many reasons

  • Growth in Distribution Channels & Delivery Systems

    • Branch, Internet, Contact center, ATM, Payments, Kiosks, Mobile Devices…

  • Lack of Industry understanding in the past

    • BI-DWH is about bank profitability & risk, retention and acquisition, not just reporting

    • Understanding your customer (customer data), automation and integration across systems

  • BI-DWH is now a Strategic Platform


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Unnecessary Software Spending

Excessive Training Development and Support

Multiple Versions of “Truth”

Business Analytics in Banking2ND Time Around

Multi-Vendor BI Strategies

Integrated BI Platform

  • Unified Data Layer

  • Centralized Tools

  • Shared Metrics

  • Complete Customer View


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Future Trends in BankingException Based Banking – Real Time Interaction

Example – Retail Banking

Industry

Segments

Key Events

Evaluations

Actions

  • Request to Close an Account

  • Significant Balance Fluctuation

  • Address Change

  • Birthday

  • Call Frequency/Trends

  • Documentation/Funding

  • Fraud Alert

  • Last Payment or Prepayment Request

  • Maturity of Investment

  • Missed Payment

  • Name Change

  • New Channel/Product/Service

  • Trade Information/Transaction/Information

  • High Net Worth

  • Mass Affluent

  • Mass Market

  • Premier Banking

  • Geography

  • Demographics

  • Product

  • Account

  • Asset

  • Liability

  • Contact Behavior

  • Customer Information

  • Customer State

  • Warning/Fraud Detection

  • Alert/Notification

  • Sales Call

  • Correspondence

  • Email

  • Recovery Plan

  • Launch Marketing

  • Hold on Account

  • Retention Plan

  • Cross Sell

  • Personalized Plan

Retail

Banking

  • Value Proposition

    • Information driven Personalized service to the customer across all touch points

    • Help Increase customer retention and wallet share

    • Enable execution of segment strategies across branch, call center, web

    • Drive ROI from data warehouse / mining investments


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Future Trends in BankingBeyond Traditional BI-DWH: More Customer Centric Model

  • What to Sell

  • Which Customer

  • What Price/Risk

  • What Channel

  • What Margin?

Select

Acquire

$

Extend

Retain

Customer

Segmentation

& Analysis

Segment a

Segment b

Segment c…

Customer Level

Profitability (RAROC)

Cost Of

Funds

Expected

Losses

Risk

Charges

Revenue

Expense

Enterprise Wide Information

Products

Channels

Business Units

Data Warehouse

& Customer Data Integration

Customer

Accounts

Financial Acct

Transactions


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Summary

  • Executives

    Concise metrics on KPIs at corporate level

    Highly correlated with overall strategic plans

  • Management

    Focused on Key Performance Indicators for a business unit

    Report employee performance versus goals

    Broader scope of business

  • Employee Users

    Targeted analytics to improve job performance

    Broadest scope for ad-hoc analytics

  • Partners

    Targeted analytics to improve multi-organization initiatives

    Limited ad-hoc capability

  • Customers

    Highly focused analytics to monitor customer

    activity and guide behavior

Detailed

Future Trends in BankingEmpower All Users - Not Just the Few

STRATEGIC

TACTICAL

ACTIONABLE

RELATIONSHIP

INFORMATIVE


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Business Users

Requirement


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Business Users Want Answers

?

Retail

Strategic Issues

Credit Risk

Finance

Tactical Issues

H R

Operational Issues

Market Risk

Liquidity Risk


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Business Users Want Answers

RETAIL

Customer Segmentation

Customer Acquisition

  • What is the customer break up across various categories (e.g. salaried, self-employed and professionals; rural and urban)?

  • How has this changed over the last three months in different organizational units reporting to me?

  • What is the demographic and lifestyle break up of my customers?

  • What are my customer acquisition costs across different products lines / channels?

  • How is sales performance across different delivery channels (agents, branches, telemarketing / call centres)?

Cross Sell / Up Sell

  • How many existing customers bought other products of the bank?

  • How many existing customers availed more of their credit facilities, or went in for an increased level of the same facilities?

  • What is the average number of products per customer? Does this differ between different customer segments? Could I see how it is in my organizational units, so I can get branches with lower products per customer to move to higher products per customer?

Budget Achievement

  • How are organization units performing vis-à-vis targets in terms of various products (e.g. mortgages, cards, consumer finance, vehicle finance)?

  • Which branches are doing better in which products?


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Business Users Want Answers

RETAIL

Channel Usage / Efficiency

Customer Attrition

  • What is the customer transaction break-up across different delivery channels (branches, ATMs, Internet banking, POS, telebanking, mobile banking, etc)?

  • What is the peak/non-peak transaction load of various bank ATMs over a period of time?

  • What is the potential of migrating transactions to lower cost channels?

  • What are the top reasons for customers to leave?

  • How many of my customers have been lost across different organizational units in the last month? In the last quarter?


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Business Users Want Answers

CREDIT RISK

Credit Portfolio

NPL Analysis

  • What is the break-up of the portfolio in terms of industries, geographies, product / instrument types? And how has this changed over the last two quarters?

  • How has my credit portfolio been changing in the last 12 months across different credit grades?

  • How are my ratings migrating / transitioning over a period of time (usually over the last couple of years)?

  • How are organizational units at meeting their portfolio targets?

  • How is the predicted vs. realized default rate in my branches?

  • How much of my NPLs are in time buckets above 3 months past due?

  • What is the categorisation of NPLs in different severity grades?

  • What is the industry-wise break-up of NPLs across different exposure types / product types / instrument types?

  • Which credit grades / which geographies / which instruments / which collaterals are my NPLs?

  • Which categories of NPLs to focus on for recoveries (based on past track record, etc)


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Business Users Want Answers

FINANCE

Cost Analysis

Financial Analysis

  • What are the major cost heads in branches / organizational units?

  • How are branches performing vis-à-vis budgeted costs? Which cost heads are at variance with budgets?

  • Branch wise Trial Balance?

  • Analysis of Region wise\Area Wise\Territory wise\Branch wise info?

  • Online information on value of assets pledged with the Branch?

Procurement

Assets

  • Number of invoices on hold due to issues pending resolution.

  • How many purchases are made outside the standard contracts ?

  • What is the provisioning for different categories of assets? How much has this changed from the last quarter?

Profit & Loss Analysis

  • Which are my more profitable branches? Regions? How has this changed over the last three quarters?


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Business Users Want Answers

HR

Employee Attrition

Employee Productivity

  • Which lines of business are facing the maximum employee attrition? How has this profile changed in the past six months?

  • Is there any area where employee attrition is a critical concern?

  • What is business per employee in different organizational units?

  • How has this changed over the last two quarters?

Employee Training

  • What are the average training hours for employees in different lines of business?


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What is the Answer?

Deploy Enterprise

Data Warehouse Enabling Analytics to Provide Business Insight


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What is Data Warehouse?Definitions

“A Data Warehouse is a subject-oriented, integrated, time-variant, non-volatile collection of data in support of management’s decision-making process.”

Bill Inmon

The data warehouse is intended for knowledge workers, that is, the people who need to analyze information provided by the warehouse and make business decisions.



Traditional business analytics environment multi vendor un integrated l.jpg

ReportingEngine

Security?

OLAPEngine

TransformationEngine

Name/Address

Scrubbing

Database

Transformation

Engine

Portal

ETL Tool

Analytic Apps

MiningEngine

Query &

Analysis

Enterprise

Reporting

Traditional Business Analytics EnvironmentMulti-Vendor, Un-integrated

  • Protracted and complex implementation

  • Escalating maintenance costs

  • Poor and incomplete BI solution


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Oracle’s Business Analytics StrategySimplify, simplify, simplify

Enable consolidation to fewer, more cost effective systems

Eliminate the need for special purpose engines“Bring the algorithms to the data, not the data to the algorithms”

Simplify the end-user experience

Simplify, costly ETL procedures

Scalable, integrated, cost-effective data warehousingAnalysis capabilities embedded in the databaseSecure, personalized, easy to use, with analytical sophistication

Complete ETL, metadata services, based on open standards


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Oracle Business Analytics PlatformSimplify Your Life

SOURCE

SYSTEM

User

Access


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Oracle Business Analytics Helps Bank to Achieve Revenue growth

  • Achieve Single view of customer Data, optimize customer segmentation

    unify the “data silos” and provide a single version of the truth throughout the enterprise reducing redundancy of marketing interactions and providing one integrated view of customer data.

  • Grow value of each Customer, align on Customer Profitability

    optimize the risk/value ratio for customer portfolio in order increase their overall profitability. Align organization around profitability driven vision at each levels, develop a cohesive interaction strategy based on that metric.

  • Better Retain profitable customers

    Understand Attrition drivers, identify risky behaviors and profile, target proactive service and marketing actions to prevent and reduce attrition

  • Better cross-sell/up sell through increased interaction intelligence

    optimize each interaction to increase perception of value added to customer. Banks need to truly understand what is being done with their products and services and how they impact a customer’s life and lifestyle.

  • Accelerate decision time

    make analytic-based decisions in seconds and pervasive rather than days or weeks long and exclusive. Deliver granular insight to all touch-points in order to respond rapidly and intelligently to customer requests, and increase the value of each interaction.



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Implementation Approach for Banking The Customer Lifecycle


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Data Warehouse in Banking The Customer LifecycleIn search of a problem

  • Business Vision

  • Avoid Field of Dreams

  • Three steps to solving any problem

    • Goals & priorities

    • Initiatives

    • Information that supports initiatives


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Data Warehouse in Banking The Customer LifecycleStarting Points

  • Top Down: Business / Functional Analysis

  • Bottom Up: Technical Analysis

  • Think Big, Start Small

  • Incremental - limit scope, limit risks

  • Each increment has value

  • Start with Proof of Concept


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Scoping The Customer Lifecycle

Study

Data Warehouse in Banking Implementation Methodology

Warehouse Planning

Phase

Warehouse Definition

Phase

Business Strategy

IT Strategy

Technical

Architecture

Warehouse Infrastructure

Implementation

Business Application

Implementation

Requirements Capture

Increment 1

Increment A

Proof of Concept

Increment B

Increment 2

Increment C

Increment 3

Increment Z

Increment n


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What are the Analyst Saying The Customer Lifecycle


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Oracle Dominates the VLDW Market The Customer Lifecycle

Winter 2005 “Top Ten” Results Summary

  • The world’s largest commercial database runs Oracle

  • The world’s largest commercial DW runs Oracle

  • The world’s largest commercial UNIX DW runs Oracle

  • The world’s largest commercial Linux DW runs Oracle

  • The world’s largest scientific database runs Oracle

  • Oracle powers nine of the world’s top 10 UNIX OLTP systems

  • Oracle powers 100% of all Linux DSS and OLTP measured in the Winter 2005 TopTen program

  • Oracle customers represent 58% of the all validated participants in the Winter 2005 TopTen program

Source: Winter Corporation, September 2005


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Enabling Banking Customers The Customer Lifecycle


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Grid The Customer Lifecycle Momentum in Financial ServicesThe world’s leading FSI Institutions are moving to Grid Computing

917 Production Customers / 156 of these are in Financial Services!


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Summary The Customer Lifecycle


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Value of Business Analytics The Customer Lifecycle

  • Enable Banks to have the single source of “Truth”– thereby able to differentiate themselves from the competitors

  • Enable the Banks to do performance management through measurable KPI within the enterprise

  • Enable Banks to be fully customer centric – Providing complete information about the customer and their relationship with the Bank

  • Enable the Bank to provide the service differentiator and innovation to it customer

  • Enable Banks for Corporate Compliance and Regulatory Compliance

  • Enable Banks to provide analytical information to every realm of the business for making better and informed decisions

  • Enable Banks to provide a uniform method for information delivery irrespective of location and geography though a well defined user friendly dashboard


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Oracle The Customer Lifecycle’s Differentiation

  • Single Integrated Architecture

  • Oracle BI solution is scalable and Flexible

    • Real Application Cluster

    • Various Options e.g. Partitioning, OLAP

  • Provides the Single Source of truth

  • Oracle Lowers the TCO of Data Warehouse

    • Consolidation of Data Marts

    • RAC for Scalability, Availability & Flexibility

    • Simplify the Data Warehouse deployment

  • Completeness of BI&W Vision & Solution

    • Single & Stable Vendor for all your BI&W needs

    • Platform, Tools, Applications

  • Leadership in the Market Place

    • Analysts Reports & Benchmarks

    • Reference Customers

  • Security and Audit

    • Most Secure Database

    • Extensive audit capabilities within the Database

Oracle Business Intelligence

& Data Warehousing


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Thank You The Customer Lifecycle


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