Analytics

Business
in Financial
Analytics
Services

Tap into the true value

of analytics
Organize, analyze, and apply data
to compete decisively

Content

Preface
From the Editors Desk
Analytics for a New Decade
01. Post-Crisis Analytics: Six Imperatives

05

02. Structuring the Unstructured Data: The Convergence of

Structured and Unstructured Analytics

13

Revitalize Risk Management

03. Fusing Economic Forecasts with Credit Risk Analysis

21

04. Unstructured Data Analytics for Enterprise Resilience

29

05. Why Real-Time Risk Decisions Require Transaction Analytics

37

Optimize to Drive Profits

06. Ten Questions to Ask of Your Optimization Solution

47

07. Practical Challenges of Portfolio Optimization

55

Understand Your Customer

08. Analytics in Cross Selling A Retail Banking Perspective

61

09. Analytics as a Solution for Attrition

69

10. Customer Spend Analysis: Unlocking the True Value of a Transaction

77

11. A Dynamic 360 Dashboard: A Solution for Comprehensive

85

Customer Understanding
Fight Fraud More Effectively
12. Developing a Smarter Solution for Card Fraud Protection

93

13. Using Adaptive Analytics to Combat New Fraud Schemes

103

14. To Fight Fraud, Connecting Decisions is a Must

109

Improve Model Performance

15. Productizing Analytic Innovation: The Quest for Quality,

117

Standardization and Technology Governance

Leverage Analytics Across Lines of Business
16. Analytics in Retail Banking: Why and How?

125

17. Business Analytics in the Wealth Management Space

135

Analytics in
Financial
Services

08
Analytics in Cross Selling
A Retail Banking Perspective

Yamini Aparna Kona

Senior Consultant,
Infosys Technologies
Limited

Balwant C. Surti
Industry Principal and
Head-Solutions Architecture
and Design Group,
Finacle Solutions Consulting
Practice,
Infosys Technologies
Limited

The case for cross-selling to the existing customers of a bank is an easy onethe difficult
part is executing it. Today, there are several different techniques for cross-selling effectively.
The common thread that runs across them is data and analytics. Predictive analytics based
on various models have created offers that are just right, just in time. Data mining and
analytics have helped in discovering trends and populating models that are the backbone
of predictive analytics. Value analytics is another approach to cross-selling that is available.
The call center, the branch, the webevery distribution/ service channelall leverage
analytics in some way to cater to the entire gamut of customer needsnot just what the
customer seeks. This article analyzes the different ways in which cross-selling works
with analytics, its intrinsic challenges, and the emerging trends in the analytics field.

Why Cross-Selling is Imperative

The experience of many financial institutions
shows that the cost of selling an additional
product to a current customer is one-fifth
the cost of selling the same product to a
new customer. This explains why crossselling, i.e., selling a bundle of products and
services to the client (usually an existing one),
is being increasingly considered the cornerstone
of the retail financial industry.
As other sources of organic growth (for example,
loan demand) have slowed, and adding new

clients becomes increasingly difficult and

expensive in a highly commoditized industry,
selling more products to existing customers
makes great business sense for a bank. It is an
excellent way to increase revenues and indirectly
improve customer retention, because customers
with more products tend to be more loyal.
Customer attrition rates are inversely proportional
to the number of products heldthe more products
you sell to the customer, the lesser is the chance of
the customer leaving you. As a result, moving
from a silo-product mentality to a consultative
selling approach has resulted in a proliferation of
cross-sell initiatives in the banking segment.

Approaches to Cross-Selling
Cross-selling is selling additional products
to existing customers or prospects. It may
happen along with the initial sale or after
the initial sale is made. Often, the customer
may not explicitly mention specific needs
or be aware that the bank offers products
that meet their needscross-selling taps into
this unmet potential using a variety of
techniques:
1. Person-based Approach: This is based
on either the skill of the Customer
Service Representative (CSR) or through
a structured question-based approach. In
either case, the emphasis here is to elicit
the need through customer interaction.
Often, the skill of the CSR is the deciding
factor of success, and little or no use of
analytics is made.
2. Rules-based Approach: The system
defines a set of rules and uses the
information collected from the customer
to arrive at a cross-selling offer. Some
analysis of the customer data is made. For
example, while processing a loan
application, enough information is
available to decide whether the prospect
qualifies for a credit card as well.
3. Value-based Approach: This follows a
portfolio approach to the customer's
assets and liabilities with the bank. Here,
a customer is given a scenario with one
product that he or she has asked for.
Then, based on other information
obtained from the customer, alternate
scenarios are offered. Certain value
metrics (for example, net assets,
installments per month, average rate of
interest paid, etc.) under multiple
scenarios with additional products are
presented to the customer highlighting
benefits and opportunities for growth.
Value-based approaches are often more

62

effective in the hands of a skilled advisor

who can extract portfolio-related
information from a client. This approach
also has the advantage of revaluing the
portfolio at periodic intervals and
coming up with other opportunities for
cross-selling.
4. Predictive Analytics-based Approach:
This refers to a set of approaches where a
model (or a set of models) characterizes
customer buying behavior for financial
products. Past customer data is used to
build, refine and modify predictive
models. These models are used to predict
future customer buyinginformation
used to generate customer offers.
In many circumstances, current or recent
transactions are used as trigger points in
the system, and very often, the current
customer interaction is used as the means
to deliver the offer. Trigger-based models
can range from simple to sophisticated.
Advanced versions can analyze a current
online transaction and couple it with past
data to present relevant offers. Offline
offers are also often analyzed to come up
with the best channel for delivery of the
offer (for example, by mail, through a
call, etc.) and some offers may be made
using a combination of channels used in
an orchestrated manner to get the
customer hooked (for example, a teaser
mail, with a click to a website or a phone
number to call or meet a particular
branch officer). The success or failure of
an offer is also an input to the model to
improve future success rate.
5. Social Networking-based Approaches:
These are not yet prevalent in retail
banking, but here again, a person's social
networks, likes, dislikes, preferences,
recommendations from network friends,
and products used by others in the
network, can be analyzed using
sophisticated models to arrive at probable
cross-selling opportunities. One relevant

Increased role of data and analytics in cross-selling

Figure 1

Predictive

Value

Social networks

Rules
Person

non-financial example is Amazon's

product recommendation engine that is
based on users who make similar
purchases. (Refer Figure 1 for Increased
Role of Analytics in Cross-Selling.)
Barring the first approach, where the number
crunching is done mostly in a person's brain,
every other approach calls for heavy use of
analyticsthe analysis of data, as well as the
creation of models, rules engines, and offer
databases.

1. Data Mining can uncover potential

customers who can be targets for cross-selling,
and lead to generation of off-line offers.
2. CRM Systems for sales, marketing and
servicing, can use online analytics to
make cross-selling offers.
3. Predictive Analytics can be used to
make both online and offline offers by
predicting most likely choices of the
customer based on past data.

Analytics in cross-selling

Figure 2

Other technology
used in cross-selling
includes event
processing, rules
engines and more.

Reporting

Business
Intelligence

Text
Analytics
Crossselling

Predictive
Analytics

Data
Mining

63

Role of Analytics in
Cross-selling
The role of analytics in cross-selling is
described in Figure 3.

Cross-Selling Solutions
1. Home-grown or Assembled Solutions:
Amongst internal initiatives to use
predictive analytics, the most common
application is often cross-selling. Inhouse data warehouses provide the data,
and business intelligence tools, predictive
analytics tools, rules engines and coding
provide cross-selling solutions.
2. CRM Solutions: CRM solutions from
leading vendorssuch as SAP, Oracle,
etc.come with cross-selling modules,
which can be configured and used along
with the sales and marketing modules of
the solution. CRM analytics are used to
provide the data and power the crossselling engine, with the operational CRM
providing the delivery. Some core
banking solution suites that offer a CRM
solution also offer cross-selling solutions
through their customer analytics module
(for example, Finacle Analyz).
3. Point Solutions: These are specific
solutions that are made for the primary

purpose of cross-selling. Though they

may not be part of a suite of products,
point solutions are easy to integrate with
existing point-of-sale/ service solutions.
Often, these solutions are an easy way of
bringing cross-selling to an existing
environment with minimal changes to
existing systems. Most of them rely on
specific technologies and some rely on a
combination of technologies. Examples
include Finacle Customer Analytics,
Customer XPs, and TIBCO's CrossSelling Solutions.
4. Channel-specific Solutions: Some
solutions are designed around specific
channelsa call center, for example. These
solutions can monitor call center volumes,
and trigger extensive cross-selling with
incoming calls if the call volume is low.
When call volumes are high, opportunities
for follow-up are generated. Similarly,
outbound call prioritization can be done,
based not only on probable success rates,
but also based on higher probability of
cross-selling.

Challenges in Leveraging
Analytics
Analytics certainly present a summative view
of customer transactional and behavioral
patterns. However, the following challenges
are slowing down the adoption of analytics by
financial institutions:

Role of analytics in cross-selling

Role

64

Figure 3

Illustrative Examples of Analytics Used

1. Actual process of cross-selling

Predictive Analytics, Portfolio Analysis

2. Analyzing past data to uncover trends

and changes in customer preferences

Data Mining, Reporting, Business

Intelligence

3. Measuring effectiveness of cross-selling

Reporting, Web-analytics, Channel Analytics

n
Lack of Expertise: A combination of
domain knowledge and data analysis
ability, a pre-requisite for effective
implementation of analytics, continues
to be elusive. A banking end-user,
though an expert in his domain,
often faces a challenge to interpret
and analyze the myriad statistics
thrown up by the analytics platform.
A data analyst can compile the statistics
quickly, but is dependent on the business
user's domain expertise to organize
and analyze the data and communicate
it in the form the end-user needs it, to
facilitate an actionable decision.
The whole process may involve several
iterations, resulting in a significant
lag time between data collection and
action and frustration on both sides.
Predictive analytics, especially, are
considered a niche realm, requiring
extensive training for effective
implementation.
Need for Clean Data: Statistical
n
models are only as good as the data
fed into them. The majority of statistical
models not only demand accurate data
with the least possible approximations,
but also require that data be scrubbed
and neatly formatted in a particular
way to ensure quick and meaningful/
actionable recommendations. However,
a significant portion of the customer
data, maintained by banks happens to
be inconsistent and siloed, making it
difficult to meet the formatting standards
of analytics models.
Operational Difficulties: The process
n
of deploying sophisticated analytics
models usually involves accessing
data from and/ or transferring data
among numerous machines and
operating platformsrequiring seamless
interoperability of various applications

and software. This adds to the cost of

implementing analytics models, which
are already considered on the pricey
sideespecially by small and medium
banking enterprises. In addition, lengthy,
interactive database queries and complex
analytics scoring processes can congest
networks and adversely affect database
performance.

Need for Real-time and Advanced

Analytics: End users are no longer
content with analyzing historical data
and understanding past sales patterns.
Financial organizations now want realtime data streaming and analysis that
facilitates on-the-spot business decisions.
User demands are fast moving from
what happened scenarios to what
may/ will happen to be prepared with a
ready action plan. Analytics models are
expected to answer what will be the
possible outcomes out of action A vs.
action B. This requires high performance
analytics models that are capable of realtime data analysis. There is growing
interest among banks in advanced
analyticsthough implementation has
yet to pick up. (Refer Figure - 4 for
Industry Level Advanced Analytics
Adoption Trends.)

Emerging Trends in the

Analytics Field
Over the past couple of years, business
intelligenceof which analytics are a
parthas been catching the attention of
financial services industry decisionmakers, who are realizing the need to
transform the increased amount of
available disparate customer transaction
pattern data into actionable information.
Keeping with the growing interest, the
following important trends are observed in
the analytics field:

65

Industry-level advanced analytics adoption trends

Figure 4

What are your firms plans to adopt the following business intelligence technologies?
Expanding/
upgrading
implementation

Planning to
implement in
the next 12
months

Implementing/
implemented

Reporting tools

31%

31%

Data visualization, dashboards

17%

Specialized database engines

18%

Business performance solutions

16%

Decision support solutions

15%

11%

10%

10%

Data quality Management

15%

10%

11%

10%

Advanced analytics

9%

22%

11%

Complex event processing 8% 5% 6% 6%

Text analytics
In-process analytics

9%
10%

10%

9% 3% 7% 6%
1%
3%
29%
2% 4%

12%

18%

15%

11%

Interested
but no
plans

Planning to
implement in
a year or more

8%

10%

9%

9%

27%
28%
28%

16%

8%

20%

7%

18%

8%

22%

29%

9%

28%

34%

13%

28%

33%

13%

41%

3%

7%

22%

21%

Dont
know

10% 5% 2%

19%

13%

11%

Not
interested

19%

Base: 853 North American and European software decision-makers responsible for
packaged applications (percentages may not total 100 because of rounding)
Source: "The State Of Business Intelligence Software And Emerging Trends: 2010." Forrester Research. May 10, 2010

n
Packaged Analytics Applications are
in Demand Business users, especially
financial institutions, are increasingly
demanding packaged analytic
applications that are specifically
designed for online marketing/ crossselling, fraud detection, online credit
analysis, online trading/ investment
advisory, and others. To date, many
organizations have attempted in-house
customization of analytics applications
to meet such specific ends. Such
re-architecture may no longer be
necessary with the emergence of
sophisticated event-driven/ complex
event-processing products and predictive
analytics platforms that can support
these capabilities.
Software as a Service (SaaS) Finds
n
Demand with Smaller Banks SaaS

66

business intelligence vendors are

expected to find great traction. Many
small to medium-sized banks are leaning
towards SaaS models that allow the user
to use the application through
affordable monthly subscriptions
without heavy IT or manpower
investments. Small and medium-sized
banks will leverage SaaS to architect
analytics applications that meet with
their specific requirements.
n
Open Source Solutions Gain Traction
Open source analytics solutions are fast
eating into the market share of onpremise solution providers. Apart
from low cost, convenience is also a
contributing factoropen source
solutions can be deployed alongside onpremise solutions. Open source is
providing an opportunity for recession-

hit organizations to experiment with a

mix-and-match model and acquire
components of analytics solutions from
various providers at a fraction of the
price. Just as one might assemble spare
parts in the backyard, businesses are
toying with the concept of reaching out
to best-of-breed open source vendors for
various phases of the analytics
processfrom charting to data
crunching, statistic modeling, predicting,
and reporting. The soaring sales of
vendorssuch as Pentaho and
JasperSoftbear testimony to the
growing popularity of open source in the
analytics field.
n
Mash-ups Make an Entry Over the
next couple of years, many analytics
applications are expected to be deployed
through coarse-grained application
mash-ups, which provide a cost-effective
means to embed analytics into business
processwithout involving major
re-architecture work.
n
Improving Analytics Literacy
Vendors are realizing that providing
applications with rich graphical
representations and complex
dashboards is not enough to satisfy
business users, unless the users have
a means of deciphering the output. That
is why we will begin to see vendors
churning out flexible and userfriendly models with built-in training

features that will support simulation

using historical data, which helps
experimentation before starting the
actual analysis.
n
Green Initiatives will Catch Up with
Analytics Vendors Initial green efforts
in the analytics/ business intelligence
field have come from hardware vendors,
resulting in reduced energy consumption.
Software vendors are expected to enter the
market with offerings that will enable
companies to monitor their emissions
and sustainability exercises.

Conclusion
Analytics have a key role to play in
helping the banks to increase revenue
by discovering and fulfilling genuine
customer needs. The pressure to increase
sales is even more urgent now than ever
before and the use of online analytics and
predictive analytics can make the job of
cross-selling a non-invasive, seamless part
of every customer interaction. Predictive
analytics provide the much-needed,
data-based support to cross-selling, which
will convert the task of selling more into
an act of fulfilling a customer need by
preemption. By ensuring that the cross-sell
is aimed at optimizing value to the
customer, banks can gain additional
business as well as customer loyalty and
stickiness.

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