While much of the world is still dipping its toes in the world of complex data analytics, the financial services industry has already taken the plunge.
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According to a recent survey from the University of Oxford's Saïd Business School and the IBM Institute of Business Value, 71% of financial services firms are exploiting their troves of information on transactions, customer records, click streams and the like to transform their services and marketing activity. That's twice the figure for two years ago, and the survey date is June of this year.
For years, financial institutions have found themselves sitting on vast mounds of data. This data was useless while it remained unstructured and unanalysed.
When put properly to use, though, it allows companies to target customers with the most relevant products and services, assess customer risk more accurately and identify new revenue streams.
Predictive analytics tools enable banks to mine historical data for insights on likely behaviour in the future. Such tools can make for far greater efficiency in targeting special offers and other marketing. They can also help in fraud detection by identifying patterns of suspicious activity and flagging them for investigation: cash transactions just below reporting thresholds, for example, or unusual patterns of activity.
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Meanwhile, sentiment analysis tools based on natural language processing can allow vital insights to be drawn from social media channels, and used to inform loyalty and rewards programmes.
Not only does such data analysis improve the bottom line, it also boosts impressions of customer service: better-targeted communications are less likely to be seen as irritating. And this is now more important than ever, especially in the UK, following government moves to make switching banks a much easier process. Similarly, it can enable organisations to build better relationships with their partners, again through the ability to understand patterns of activity more clearly and streamline interaction.
The most effective big data analysis applications for financial institutions, found the Saïd Business School, are those that start by identifying business strategies and then leverage their existing infrastructure and data sources to suit. They then expand their data sources, infrastructure and analytics capabilities incrementally over time, rather than jumping in with both feet. Here, we take a look at a couple of successful applications: at Scottish Widows and Nordic insurance company Tryg.
Scottish Widows chooses Oracle on Demand over Salesforce
Scottish Widows evaluated both Oracle CRM On Demand and Salesforce.com, using two sales teams in a live environment
Part of Lloyds Banking Group, Scottish Widows is one of the most-recognised banking brands in the UK, thanks to its iconic advertisements. It serves many of its six million life insurance, pensions, and investment customers through a network of 18,500 independent financial advisors (IFAs).
Following Lloyds' acquisition of Clerical Medical in 2009, there was a need to integrate its IFA support team with that of Scottish Widows as quickly and efficiently as possible. This time pressure, says the company, meant that 'software as a service' was an apt solution. Less urgently, but equally importantly, the company also wanted to increase the revenue it was receiving from the IFA channel and to target IFA-focused campaigns and initiatives more effectively.
To that end, Scottish Widows evaluated both Oracle CRM On Demand and Salesforce.com, using two sales teams in a live environment, each testing both solutions. The company concluded that the Oracle system was the most easily navigable, as well as the more secure option – of vital importance, of course, to a bank.
“Oracle CRM On Demand offered us a private hosted version that was more acceptable than a shared, multi-tenant application,” says Gillian Kidd, Scottish Widows' distribution delivery manager. “The Oracle Insight team was also very consultative and committed to understanding our needs".
The system was then rolled out to the first 400 users at 14 sites within two months, replacing the fragmented, customised, manual IFA management systems already in place with a standardised suite of processes. The analytics features have given the company easy access to far more detailed data on its existing accounts, all of which is held centrally and accessibly, allowing far more sophisticated campaign management.
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As a result of the implementation, Scottish Widows says it is now pulling in significantly more revenue per account manager -- while simultaneously freeing those account managers up to spend an extra three-and-a-half hours per week supporting the IFAs with whom they work.
By making a complete history of all IFA interactions easily accessible online, it's cut the time that account managers spend preparing for one-on-one meetings with IFAs by two thirds. Before the implementation, staff a huge amount of time simply collating the data needed to manage sales teams; this time has now been cut by 75%.
All IFA sales, administration and account management activity can now be logged and updated centrally, and accessed via mobile devices as well as desktops, using Oracle Mobile Sales Assistant. This, says Kidd, has improved insight as well as productivity.
Sales managers' administration time has been cut by a fifth, and the time needed to prepare sales and management reports by three quarters.
“Oracle CRM On Demand gives us access to real-time, independent financial advisor intelligence in a maximum of three clicks,” says Kidd.
Best of all, Scottish Widows reckons it achieved a positive return on investment within the system's first year of implementation.
Tryg Insurance uses Portrait to paint customer picture
The second largest personal and commercial insurer in the Nordic region, Tryg Insurance has more than 2.7 million private customers, along with 140,000 business clients. Altogether, it handles $3.7 billion gross insurance premiums.
Every month, hundreds of thousands of customers reach the end of their insurance deal and need to make a decision about renewal – and, in an industry notorious for its high churn rate, Tryg was naturally keen to target its marketing efforts as efficiently as possible to keep customer retention high.
Unfortunately, thanks to a series of mergers and acquisitions, the company's customer data was held in several formats on multiple platforms, making it almost impossible to mine for useful insight. The challenge was to bring all this data together in such a way that it could be exploited quickly and effectively to predict customer behaviour and target marketing communications more efficiently.
Back in 1996, Tryg introduced Pitney Bowes Software's Portrait Dialogue to manage renewals and run special campaigns. Although much campaign work was still handled by a series of external agencies. Using Portrait Dialogue, Tryg has been able to automate a set of sequenced communications and bring this work in-house.
The company later added Portrait Miner, a predictive analytics system, and is also now implementing Portrait Uplift Optimizer, enabling it to focus its marketing only on those customers that are most likely to be persuaded to renew.
We now plan, design, implement and evaluate our campaigns using Portrait
Jon Terje Amland, Tryg Insurance
“We now plan, design, implement and evaluate our campaigns using Portrait. This enables us to sell, increase loyalty, enhance customer knowledge and understanding, and improve our processes,” says Jon Terje Amland, senior project manager at Tryg Insurance. “The Portrait Customer Interaction Suite is a crucial tool for us.”
On the basis of previous customer behaviour, the team uses the tools to identify which customers are the best prospects for renewal, along with the most effective way of contacting them, whether that be an email, an SMS or a phone call.
“You look the example of customers who don't renew their home insurance policy; you look at many hundreds or thousands of customers and build a behavioural model. Then you look into the future and look at the existing customer base and see which are most likely to churn,” says Kieran Kilmartin, vice president of international marketing at Pitney Bowes Software.
“Some will stay, whatever you do; some are a lost cause. Some have a risk of leaving, but by the right intervention you can make them stay. And sometimes if you're communicating to an individual you will have a negative effect; by reminding them about renewal it might be that you've actually provoked them to churn.”
As a result of the implementation, Tryg is now seeing higher response rates for its campaigns. Customer renewal rates have improved by up to 6%, and some campaigns have seen a return on investment of as much as 25%. Eighty per cent of customers say they find communications from Tryg relevant and, crucially, 36% say that those communications have positively influenced them to renew.
“Using Portrait we have been able to make substantial process and efficiency gains and have witnessed significant improvement in our customer renewal rates," says Jon Terje Amland, Tryg's senior project manager.