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 • Business Requirement in Banking • Oracle Business Analytics Solution • What Are Analysts Saying • Summary
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
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
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
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
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
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
Business Users Requirement
Business Users Want Answers ? Retail Strategic Issues Credit Risk Finance Tactical Issues H R Operational Issues Market Risk Liquidity Risk
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?
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?
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)
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?
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?
What is the Answer? Deploy Enterprise Data Warehouse Enabling Analytics to Provide Business Insight
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.
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
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
Oracle Business Analytics PlatformSimplify Your Life SOURCE SYSTEM User Access
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.
Oracle Analytic Applications Increase Value of Every Step Of The Customer Lifecycle
Data Warehouse in BankingIn search of a problem • Business Vision • Avoid Field of Dreams • Three steps to solving any problem • Goals & priorities • Initiatives • Information that supports initiatives
Data Warehouse in Banking Starting 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
Scoping 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
Oracle Dominates the VLDW Market 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
Grid Momentum in Financial ServicesThe world’s leading FSI Institutions are moving to Grid Computing 917 Production Customers / 156 of these are in Financial Services!
Value of Business Analytics • 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
Oracle’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