Making money from data: Financial business intelligence at work
Finance professionals are heavy users of BI and predictive analytics software. Find out how a variety of European finance functionaries are analysing trends, cutting costs and finding new business.
As understood by the finance function in different corporate organisations, business intelligence (BI) is likely to yield a variety of precise definitions. However, finance professionals who are using or considering procurements of financial BI software, whether in financial services companies or other sectors, usually have the common goals of increasing revenue and decreasing costs.
BI’s essential métier, in the field of commerce more generally but particularly so in financial business intelligence applications, is to use a company’s data to gain a deeper knowledge of not only how the business is performing but why, and then to use that information to make advantageous business decisions.
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“To me, business intelligence means trying to make money out of data,” said Philippe Neyt, commercial director at Belgium-based insurer Corona Direct. “The company gathers and explores lots of data, and this intelligence should help us to make more money.”
As part of its BI programme, for example, Corona has used data mining software to analyse two of its major direct mail campaigns, with the findings helping the insurer increase customer response rates to the mailings. “It is an expensive advertising medium, and we need to target well for better results,” Neyt said, adding that Corona is now working to expand the direct mail analytics effort (see “Corona Direct mines data to target customers,” below).
To me, business intelligence means trying to make money out of data. The company gathers and explores lots of data, and this intelligence should help us to make more money.
Philippe Neyt, commercial director at Belgian insurer Corona Direct
There are other areas of commonality between companies on financial BI applications: Beyond operational performance and cost control, typical uses include meeting regulatory reporting requirements, improving customer acquisition, retention and service and aiding risk management processes.
London-based law firm Reynolds Porter Chamberlain (RPC) initially deployed QlikTech’s BI software for use in tracking key performance indicators in its business operations. That continues, but the law firm also is now using the BI tools to do trends analysis for corporate clients, such as predicted outcome of claims in the insurance sector, as well as internal business managers.”
“We work heavily in the insurance sector, so clients want information on the predicted outcome of claims, for example,” said Julie Berry, RPC’s director of infrastructure and IT. “We have an approach of ‘headlights on, not taillights on’—we use historical data, but to prepare us for the future.”
Paul Groenland, a director in marketing intelligence at Rabobank Nederland, the umbrella support organisation for the Rabobank Group, said that the Dutch financial services company uses BI software in several environments, “from local branches through to customer management systems, depending on the information we are delivering and what is needed for local customers and global account managers.”
Groenland said most of the benefits of the BI programme are around reducing business costs and faster decision making, as the bank can deliver the right information to managers on a local basis.Like many other companies, Rabobank also uses BI data as an educational tool for its board of directors on the state of business operations. The information “can give them a different view on what is happening,” he said.
Financial BI enables golden view
One of the principal differences between BI and more traditional data collection models is that of consistency. BI enables a closer approach to the fabled “golden copy” of data, aimed at ensuring that anyone looking to do data analysis within an organisation is looking at the same information. That in turn should improve the ability of business executives and other end users to make sound judgments and decisions.
“People are now trying to run their business more smartly,” said Martijn Wiertz, a Netherlands-based marketing manager for predictive analytics at IBM. “They are putting intelligence in rather than just automating. This is a change in business perspective rather than just operational perspective.”
In many organizations, there is a direct connection between the business and BI software: Leadership of BI programmes often sits within the business function instead of the IT department, with heads of business departments such as marketing and customer service holding overall responsibility for the development and use of BI systems. In other cases, BI teams are jointly led by business and IT representatives.
Of course, further development of financial BI capabilities must take place in the context of an organization’s size and available resources as well as current economic conditions. As a result, some companies, such as Corona Direct, might have a BI wish list rather than a to-do list. “We could use it in other areas, but we are a small company so we need to focus on the priorities,” Neyt said.
Those potential “other areas” are enticing for the insurer, though. “We could look at a customer's propensity to buy—on client calls, the call centre operator should have an indicator of the probability of the client listening to a pitch for another product,” he said. “We could also [do predictive analytics on] claims, as we want more customers but less claims.” Another possible use cited by Neyt is analysing the company’s acceptance rules for policies to “judge in which circumstances customers in different areas should pay more.”
We work heavily in the insurance sector, so clients want information on the predicted outcome of claims .... We have an approach of headlights on, not tail-lights on—we use historical data, but to prepare us for the future
Julie Berry, director of infrastructure and IT at Reynolds Porter Chamberlain
There is also room for further development in the software itself, according to some BI users. RPC’s Berry, for example, would like to see an out-of-the-box BI system for law firms like hers that fall outside of the top 10 in the market, with standard Excel spreadsheets and the ability to create workable end-user dashboards in a much shorter timeframe than is possible now.
But even without that, Berry sees BI use expanding within the legal industry. “Law has not been a great sector in the past for data analysis, but we are getting there now,” she said.
Ironically, the very ambiguity that underpins the definition of business intelligence across different organisations is perhaps also its greatest strength: the ability to be flexible in helping finance managers and other end users to enhance business operations through the use of internal as well as external data.
Case study: Corona Direct mines data to target customers
Crafting the right marketing message for direct mail promotions, to ensure a high response rate from a broad group of customers, can be a challenge, according to Philippe Neyt, commercial director at insurer Corona Direct in Belgium. “We can get a 100% response from targeting one person well, but we need a balance in between,” he said.
Through its use of data mining software from IBM, Corona has been able to find a better balance, Neyt added. Over the past two years, he said, BI and analytics applications on two major direct mail campaigns have helped the company to increase the response from customers by 32%.
“We started with one campaign and one product and expanded to another,” Neyt said. Now Corona plans to start using the software to help identify customers it’s at risk of losing and then tailor marketing campaigns aimed at keeping them in the fold. “We do some campaigns to keep our existing customers, but these go to all of our customers, so 80% of it is useless if it goes to clients who have no intention of leaving,” he said. Company officials hope to be live with the new application by the end of the year, or perhaps even by the summer.