DATA WAREHOUSING: A TOOL FOR BUILDING

RETAIL BANKING BRANDS

Dr. Subhojit Banerjee
Intitute of Business Management,VBS Purvanchal University, Jaunpur

ISSN – 161
Year: December 2008 Volume 2, Issue 4/4

Abstract: Data warehousing is an emerging technique of data base management which can act as a
strategic differentiator for data intensive sectors like retail banking. The paper starts with briefly explaining
the concept of data warehousing and points out the areas in retail banking which can be most benefited
from data warehousing. The paper also proposes data warehouse architecture to support retail banking
activity. Finally critical issues related to management of the data warehouse which will affect the
usefulness and functioning of the bank has been discussed. The paper is concluded with a futuristic outlook
of data warehousing.
Key-Words: Datawarehousing, Data Mining, Banking, Brands, Strategy

LEVERAGING RETAIL BANKING ‘blissful indifference’ that the Indian

BRANDS USING DATA
WAREHOUSING
The business environment in the new
millennium accentuates change. Retail
banking as we know is no exception to
this rule. Organizations that will survive
and flourish in this millennium are the
ones which are able to analyze, plan and
react to changing business conditions in
a much more rapid fashion. In India
retail banking has taken a myriad
change, from limited number of service
branches situated in district headquarters
it has grown to over 30,000 bank offices
operating across the length and the
breadth of the country1. Similarly the
offered services have also undergone a
vast change. ATM’s, telephone banking,
internet banking and personalized
services are giving way to fluorescent lit
halls, chained entrances and serried
ranks of cashiers.
With international banks breathing down
the neck of Indian Banks, the state of
banks had enjoyed might be coming to
an end. From being an organization
which ‘Sells services to the customer’, it
has to be an organization which ‘delivers
services as per the customers needs’. For
materializing this paradigm shift,
bankers in India need to have a deeper
insight in to their customers needs and
also continuously monitor the change in
their need pattern.
To implement this need-based strategy,
bankers are in want of more information
and knowledge than ever before. But this
statement holds true not only for banking
sector but any business in general. So
what makes retail banking special in
terms of information and knowledge?
Banking is an extensively data intensive
sector. Large amounts of data pertaining
to various transactions are generated.
This large quantity of data regarding
individual customers saving, earning and
spending pattern can speak volumes
about an individual’s taste and

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preferences, habits, family and his
personality in general. But most part of
these data is locked up in files and
computer systems and is exceedingly
difficult to get it. Ken Orr (1996) defines
this phenomenon as ‘data in jail’ 2.
Recently a significant concept that has
emerged, which addresses to this
problem is ‘data warehousing’. Data
warehousing has grown out of being just
a technique of providing efficient,
precise and flexible data management
tool to an organization’s most valuable
and critical asset. The ensuing text deals
with the concept of data warehousing in
reference to retail banking and areas
which are most sensitive for data
warehousing.
Bill Inmon (1992) is widely credited for
popularizing the data warehouse concept
and terminology. Also known as the
‘Father of Data warehousing’, defines a
data warehouse as follows3:-
A (data) warehouse is a subject
oriented, integrated, time-variant and
non-volatile collection of data in
support of management decision-
making process
By way of additional explanation, Inmon
provides these definitions:-
Subject- oriented: Data that gives
information about a particular subject
instead of about a company’s on going
operations.
Integrated: Data that is gathered in to
the data warehouse from a variety of
sources and merged in to a coherent
whole.
Time Variant: All data in the data
warehouse are identified with a
particular time period.
Non Volatile: Data is stable in a data
warehouse. More data is added, but data
is never removed. This enables
management to gain a consistent picture
of the business.
Daniel Amor (2000) defines as a copy of
the business transaction data specifically
structured for query and analysis 4. The
operational system cannot hold their data
for infinite times, therefore data is
moved in to the data warehouse.
Vivek Gupta (1997) defines data
warehouse as a structured extensible
environment designed for the analysis of
non-volatile data, logically and
physically transformed from multiple
source applications to align with the
business structure, which is maintained
and updated for a long time period,
expressed in simple business terms and
summarized for quick analysis5.
It is clear - from
B the definitions given
above, that data i warehousing largely
deals with storing
l large and varied data
that has been l collected from different
sources, over a period of time and can be
retrieved for I future analysis. The
obvious question n that comes in to one’s
mind is ‘howm is data warehousing
different fromo conventional data base
management systemn (DBMS)’? Subhojit
Banerjee (2002) states the following
distinguishing features of data
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warehouse :
1) Data warehouse is a large
collection of data, which has
already been executed.
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 2) All the data that is stored is in
reference to a particular time
frame.
3) Data is fed in to the data
warehouse through multiple
sources. In other words a data
warehouse holds a wide variety
of data pertaining to all the
functions of the company.
4) As data is fed in to the data
warehouse from various sources,
all data are first converted in to a
common platform. This enables
joining of data for query and
analysis.
5) Data can be recalled from the
data warehouse using various
front-end tools, as the user
requires.
6) Data is updated (New data is fed)
in the data warehouse
periodically.
Areas in which Data warehousing
techniques will support banking
activities: As has been mentioned earlier
that banking is an extremely data-
intensive sector. Hence data
warehousing has immense potential in
this sector. Data warehousing when
combined with effective retrieval
techniques like data mining can reap rich
harvests in retail banking in terms of
larger deposits, faster clearance of loan
proposals, and accurate prediction of
cash flows which will eventually lead to
better assessment of loan proposals and
overall reduce NPA and bad debts. Some
of the areas in which data warehousing
technique will support banking activities
are:
Customer Profiling: Customer profiling
uses data warehousing information to
help bankers understand the
characteristics and behaviour of specific
target groups. Through this process,
bankers can really understand who is
subscribing to particular offers and
schemes and how they are reacting to
promotional offers and pricing changes.
Some additional benefits of customer
profiling includes: -
 Selecting target groups for
promotional appeals.
 Finding and keeping customers with
a high lifetime value to the bank.
 Understanding the characteristics of
institutional account holders.
 Customizing the service package to
suit the individual needs of the
customers.
 Reducing operating costs by
targeting high response customers.
Identifying High-end Users: Data
warehousing enables queries which
analyze the Recency, Frequency and
Monetary value (RFM analysis) of
accounts. Since the data that is stored in
a data warehouse is in reference to a
time frame, when the last transaction has
been made can be determined
(Recency).Next how often transactions
are made can also be determined
(frequency) along with the type e.g.
transaction has been made to pay salaries
or to invest in stocks and shares can be
known. Third what amount does it
involve (monetary). The advantage of
RFM analysis is that often retail banks
take up salary accounts of large
organization in the esurience of
improving upon their ‘deposits’.
Apparently these accounts may seem to
be large in monetary terms, however
many retail banks may find it a bit
difficult to efficiently service the large
number of salaried employees that the
account may inveigle. RFM analysis can
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be useful in identifying such high-end
user who are profitable to the bank not
only in monetary terms but also in terms
of service time and cost.
Fraud Detection: Data warehousing
enables forensic analysis. Forensic
analysis is a methodology that aims at
finding patterns in the data records and
then uses these patterns to mark out
anomalous records or records with
abnormal deviations (Kharbanda &
Parthasarthi)7. Fraud involving loans,
dubious accounts and other such
fraudulent transactions which plague
retail banking can be detected and
corrective action can be initiated.
Improved Underwriting: Since data
warehousing collects data from different
sources, risk assessment which is an
essential feature of underwriting can be
improved upon. Moreover through
predictive modeling technique, which is
a method employed to look for patterns
in the data set probable risk areas along
with their chances of occurrence can be
calculated. Advanced mathematical tools
and fuzzy logic are often used to get an
accurate estimate of the risk factor and
the involved financial aspect which
arises due to the risk.
Quality Control: Retail banking being a
totally service oriented sector, is not
suited for conventional quality control
measures. Through predictive modeling
technique that has been mentioned
earlier operations can easily be
standardized and quality control
techniques like benchmarking can be
implemented.
Business Forecasting: Business
Forecasting is another area in which data
warehousing can be greatly useful. Data
that has been gathered from different
sources can be integrated to accurately
forecast future inflows.
Strategic Planning: Data warehouse
contains data from different areas of the
organization dealing with a wide variety
of subject. Such data might be critical in
representing as a whole, rather than a
conglomeration of differentiated units.
Top management, which is entrusted
with the job of forming policies and
giving general direction of the bank,
may find integrated data representing the
‘whole organization’ better suited for
strategic planning.
Strategizing and Designing a data
warehouse for retail banking: Data
ware house is a comprehensive
technology and encompasses the whole
enterprise and is best represented as an
enterprise-wide framework for managing
informational data within the
organization. For strategizing and
designing a data warehouse it is essential
to initially formulate data warehouse
architecture. Data warehouse
architecture (DWA) will represent the
overall functioning of the data
warehouse which involves structure,
collection, analysis, communication and
presentation of the data. DWA is made
up of a number of interconnected parts.
A schematic representation of a possible
DWA for retail banking is shown in
Figure 1.
Operational Database: Operational
database collects data pertaining to the
day to day transactions that a bank
makes. Operational data in banks are
generated in terms of routine
transactions such as cheque clearance,
withdrawls and deposits. Most of the
data generated in the hundreds of
branches across the country are not
available for sharing and even the head
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offices had earlier been receiving
condensed reports. Now with the
computerization of most of the branches
this issue can be addressed to as soft
copies of the operational data can be
made accessible. The main objective of
data warehousing is to create a common
platform for users (Branch Managers,
Loan disbursement officers etc.) to
access data created from other sources
(e.g. A branch manager can have data
about a previous loan proposal for a
cottage industry that had been made at
Kodaikanal and take decision about a
similar proposal at Haldwani) and mix it
with external databases such as
demographic, econometric, competitive
and purchasing trends.
APPLICATION
MESSAGING
LAYER
Information Access Layer: This layer
contains the tools which users require to
analyze the data. Some commonly used
tools that are in use are Excel, lotus 1-2-
3, Access, statistical analysis system etc.
This layer will also contain the hardware
and the software, which will help in
representation of the data in reports.
Spreadsheets, Graphs and charts are
commonly and widely used. The
information access layer can be
expanded enormously, especially as end
users have access to PC’s and these can
be networked through LAN.
EXTERNAL
DATABASE
INFORMATION ACCESS

DATA DIRECTORY LAYER DATA

DIRECTORY
PROCESS MANAGEMENT REPOSITORY

Fig 1: Data warehousing Architecture (Source: Data warehousing technology©Copyright

1996 by The Ken Orr Institute; revised edition, 2000

Data Access Layer: This is the portion database and the information access
which contains software which creates layer. The language which will build the
the interface between the operational database is decided upon. One thing that

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has to be kept in mind while choosing
upon the language is the user’s
information need. Hence ideally a
language which is best suited will
support a wide variety of queries. The
common data language that has emerged
is SQL. Recent developments in data
access layer has enabled of a series of
data access "filters" such as EDA/SQL
that make it possible for SQL to access
nearly all DBMSs and data file systems,
relational or nonrelational.
Data Directory (Metadata) Layer: Meta-
Data is the data about the data within the
enterprise. In order to provide universal
access to end users, some kind of a
directory has to be built. The key issue
here is that a functional data warehouse
collects data from different sources
(internal as well as external). Often these
data are in different formats and is very
hard to bring them on to common
platform. Some banks like Nordea bank
of Sweden use more than one platform 8,
but this makes universal access to end
user difficult and needs more
specialization and training on part of the
end user.
Process Management Layer: Process
management layer is responsible for
updating and maintenance of the data
warehouse. For retail banks this is a very
important component as this involves
maintenance of metadata. With every
change in the external environment new
variety of data is generated. This has to
be classified and added to the directory
with the help of standardized protocols
or procedures.
Application Messaging Layer:
Application messaging is also called
‘middleware’ as this involves the
networking and the various protocols
which govern them. Application
messaging in general is related to the
transportation of information around the
organization. Application messaging can
also be used to collect transactions or
messages and deliver them to certain
location at certain time.
Data Warehouse (Physical) Layer: This
is the main database where the data is
stored. This is stored such that data is
easy to access and is highly flexible.
Commonly data warehouses are built on
a client/server platform however data
storing in mainframes is also not
uncommon.
Data staging Layer: Data staging
involves replication (making copies),
selecting, editing, summarizing and
loading the data warehouse with data
from operational/or external databases.
Data staging also encapsulates data
quality analysis programs and filters that
identify patterns and data structures
within existing operational data.
Managing data warehouse for brand
differentiation: For a data warehouse to
provide meaningful information to users,
the key issue is the management of your
data warehouse. Data warehouse can be
built in a number of ways depending
upon the need of the end user e.g. a large
central data warehouse which has users
and sources linked at the same time,
while there can be distributed
warehouses, each one containing
specialized data but interlinked, or there
can be partitioned data warehouse which
has data partitioned on the basis of time.
In any of the warehouse type the optimal
data warehousing strategy is to select a
set of users who will most benefit from a
data warehouse and estimate the value
addition it will overall make to the
organization (long term as well as short
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term). An analysis of their issues,
questions, data needs and training needs
has to be ascertained. Based on these
facts the type of data warehouse strategy
has to be built.
Some of the critical issues in data
warehouse management which can
create a brand differentiation in terms of
improvised services to the customer are:
Standing out in the crowd: Retail
banking is full of banks, which are
providing similar services. Very little
differentiation amongst the various
banks exists. However, now customers
are looking for more and more
personalized services. Banks such as
IDBI and HDFC made inroads in to the
banking market with the introduction of
ATM’s which fuelled the customers
latent need for having a queue less
deposit and withdrawl operation. Such
changes which will eventually be critical
for survival in the long run can only be
achieved if deeper insights in to
customers needs are made. Often needs
are small and community or locality
centric. Such subtle needs can be well
detected using data warehouse
techniques.
Increasing Penetration: Data needs in a
bank does not stop at managerial level.
Data warehouse design may be initiated
to provide data and information for
decision makers, but the ultimate
objective that has to be kept in mind is to
provide data at every level including
customers and external agencies. A data
warehouse which has little scope for
expansion and is bound to be redundant
over a period of time. The figure 2 given
below shows the growth of the data
warehouse over a period of time.

Fig 2: Growth of Data warehouse

Current customers, potential customers, investors, Govt agencies etc.

TIME

All the staff in all the branches

Asst.managers, officers,
Cashiers
Mngrs &
Exectvs

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Internal marketing: Data warehouse
must support the function of internal
marketing i.e the task of hiring, training
and motivating able employees who
want to serve the customer well9.The
final aim of the data warehouse is to
provide better and improved service to
the customer. As we have observed that
this involves a large amount of
commitment from the employees who
have to transform information in to
actions. Data warehouse has to adopt a
structure which takes in to consideration
the skill-set, motivation level and the
creativity of the employees. If the
structure does not commensurate with
the employee’s capabilities the whole
system will collapse and instead of
improving the services may lead to
overburdened employees and more data
with no meaning.
Employee Training cost: Employee
training is an issue which has been
mentioned earlier in the text. However
the cost which the organization will
incur is a critical and subjective issue.
Cost that has to be considered will not
only cover the financial cost but also
invisible costs of man hour lost and
employee redundancy has also to be
considered. Often training is followed up
by promotion/redeployment. Either case
adds up to the cost. Data warehouse
strategy has to be supported by well
designed Human Resource policy.
New services and NPD: A successful
data warehouse will support innovative
thinking and will lead to improved
problem solving throughout the
organization. With the advances in
telecommunication and information
technology, demands for newer products
and services in the financial sector are
on the rise. Addition of new services and
new product developments (NPD) must
be one of the major objectives of the
data warehouse. For this the data
warehouse should be flexible enough to
support a wide variety of application
software and also be susceptible to
technological innovations.
E-Banking and security issues: Retail
banking is fast adapting to the
technological changes that are taking
place. A data warehouse that does not
support E-banking function will not fully
utilize the potential of data warehouse.
In a survey conducted by Claus
Nehemzow (2003) of the Online
Banking Association, member
institutions rated security as the most
important issue of online banking 10. A
data warehouse should be secure enough
to withstand security breaches and
should ensure customers confidentiality,
privacy and security of transactions at all
levels.
Channel Integration: Channel
integration means that an institution
presents an identical face to the
customer-be it in the branch, on the web,
at an ATM or for that matter, through a
sales representative or a broker. An
identical face, an identical message. Or
better still, messages that reinforce each
other. If a sales representative tries to
sell a housing loan, you get e-mail a day
later reminding you about the loan. An
efficient data warehousing strategy must
support channel integration as this will
result in incremental economic activity
and improved efficiencies of
communications.
Planning for the future: Data
warehousing being a relatively new is
unpredictable as to what the future
developments will be. However it is
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clear that data warehousing will evolve
from being an ocean of ‘free-floating
data sets’ to a more comprehensive
Knowledge providing unit. Already
areas such as ‘Knowledge Management’
(KM) are emerging out of data
warehousing techniques which promise
newer frontiers. Organizations of lately
have realized that organizations who
cannot be innovative and adaptive will
perish. Knowledge Management is an
area which will be a predictable
advancement on data warehousing.
Technologies like artificial intelligence
(AI) and ‘Blue-tooth’ will soon take over
conventional data processing and
retrieval techniques.
Changes in the hardware front will also
greatly affect the future shape of data
warehousing. Wireless networking and
devices which are compatible to a wide
variety of platforms will enhance the
capabilities and scope of data
warehousing. Development of parallel
computing especially in the areas of data
base with improved query engines will
be one of the major developments of the
future. The availability of improved
tools for data visualization (business
intelligence) will allow users to see
things that could never be seen before.
Data warehouses may become the future
‘brains’ of the company with advanced
capabilities to take decisions and make
judgments.
Conclusion: The ability of a brand to
add credibility has been proven through
various research studies (Carpenter,
Glazer and Nakamoto 1994). Retail
Banking in India has come to a point
where brand differentiation in terms of
improved and customer oriented services
has become crucial for long term
survival and growth. Data warehousing
technique provides for a new solution in
data storing and retrieval and can be the
basis of a brand differentiator from its
competitors.
Although data ware housing is a
relatively new concept, but with the ever
increasing processing power, wider
band-width and improvised storage
devices, it will not be long before this
technique becomes synonymous to
decision making. In the coming few
years, the growth of data warehousing is
going to be phenomenal with new
products and technologies coming out
frequently. In order to get the most out
of this period, it is going to be important
that data warehouse planners and
developers have a clear idea of what
they are looking for and then choose
strategies and methods that will provide
them with performance today and
flexibility for tomorrow.
References:
1. www.rbi.org/39058.pdf
2. ‘Data warehousing technology’
©Copyright 1996 by The Ken
Orr Institute; revised edition,
2000
3. As quoted by Lewis, William J
(2001), ‘Data warehousing & E-
commerce’, Prentice Hall NY
4. Amor, Daniel (2000), The E-
business (R) evolution, prentice
Hall NY
5. Gupta, Vivek R (1997), An
Introduction to Data
warehousing,
http://www.system-service.com
9
6. Banerjee Subhojit (2000),
‘Emerging Trends In E-
Commerce: Data Warehousing
And Data Mining’, Commerce
Education in the new millennium
(Ed), Prayag Pustak Mahal

7. Kharbanda, Vikas and

Parthasarthi (July-December
2001), Decision, Vol 28, IIM-C

8. Enders Albrecht, ‘From e-

banking to e-business at Nordea
(Scandinavea): The worlds
Click-and -Mortar bank’,
Copyright© 2004 INSEAD,
Fontainbleau, France, Distributed
by European Case Clearing
House, England and USA

9. Kotler Phillip (1999), ‘Marketing

Management’, Millenium
Edition, pg 22, PHI (Indian
reprint)

10. As quoted by Mishra AK,

‘Internet Banking in India’,
www.banknetindia.com

11. Carpenter, GS, Glazer R,

Nakamoto K, ‘ Meaningful
brands from meaningless
differentiation: The dependence
on Irrelevant attributes’, Journal
of Marketing Research 31
(August 1994): 339-350

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