ABC Bank

Business Intelligence Implementation

Benefits of Business Intelligence Implementation for ABC Bank Abrar Khan

IS-535 Managerial Applications of Information Technology Professor Muhammad Khan December 4, 2010

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Business Intelligence Implementation

Contents
ABSTRACT ....................................................................................................... 3 BUSINESS BACKGROUND .................................................................................. 4 DISCUSSION ..................................................................................................... 5 CURRENT BUSINESS ISSUES...................................................................................... 5 PROPOSED SOLUTION DEFINITION ........................................................................... 7 PROPOSED SOLUTION BENEFITS ............................................................................... 9 RECOMMENDATIONS FOR EXECUTIVES .................................................................. 11 CITED REFERENCES ............................................................................................... 12

ABC Bank

Business Intelligence Implementation

Abstract
This paper will review about Business Intelligence solution to be implemented in ABC Bank for effectively integrating and cross selling financial products in the organization. The paper will discuss the existing business issues like low customer cross sell, ineffective direct marketing, fraud prevention, branch ATM locations and further discuss on how these issues would be resolved by proposed integrated business intelligence implementation. Business intelligence solution is implemented by broader deployment of data warehouse environment and reporting infrastructure that will provide the business users to easily access, analyze and apply business information to day to day and forecasting activities. Business intelligence applications facilitate many activities, including those listed below: Multidimensional analysis of data Cross-functional activities Data mining Forecasting Business analysis Visualization Geospatial analysis Digital dashboard access

The expected benefit of the business intelligence is a 30% increase in each customers lifetime value by the end of the third year following the implementation of business intelligence solution.

ABC Bank

Business Intelligence Implementation

Business Background
ABC Bank is a regional back providing multiple financial products from Retail Checking and Saving accounts, Credit Cards, Mortgages and Investment products. The Bank is divided into different business units depending on the above business products. Over the period of time Bank has made multiple acquisitions and integrated them into respective existing business units. As competition intensifies in the retail financial services marketplace, accurate measures of customer value down to the account level are becoming increasingly pivotal to success at the retail end of the market. This applies both to established players and new entrants. [SIMON, NCR 2000] The amount of data collected in the banks from daily transactions to customer interactions presents a tremendous opportunity for banks to analyze the data and predict how to better offer the bank products and how much customers are satisfied by these products. According to financial consultants, in a typical retail bank portfolio, 20% of the accounts contribute profits equaling 200% of the overall return, whereas more than half of the accounts generate losses. Business Intelligence can help business clients to evaluate customer lifetime value and short term profitability expectations and to use this knowledge to distinguish between profitable and non profitable customers.

ABC Bank

Business Intelligence Implementation

Discussion
Current Business issues
ABC bank is not able to consolidate its customer base across business units. ABC bank is lacking product penetration across its customers. There is no system to know if mortgage customer has a credit card or investment account with the bank. ABC bank has increased incidents of fraudulent activity. Bank needs to better predict and avert fraudulent activities. ABC bank needs to understand fraudulent patterns before hand and set up alerts if fraudulent patterns are seen on the accounts. ABC bank is not able to easily cross sell or up-sell their products at the branch customer interactions as branch reps cant see the 360 view of the customers. Currently ABC bank just markets products to their customer without any business intelligence involved decreasing the response rate for the in person marketing campaigns. ABC banks direct marketing mail campaigns and operations have very low response rate compared to the industry standards. Banks direct marketing send offers to major part of its customer base but receive low response rates. ABC Bank needs to analyze the responses received by each channel of marketing. Bank needs to analyze which marketing channels are cost effective when compared to other channels. Bank needs to reduce cost by decommissioning ineffective marketing channels. ABC bank has issue with customer loyalty and attrition as it not able to understand what drivers affect the customer loyalty. ABC bank need to understand which offers will keep the
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Business Intelligence Implementation

customers with the bank and also encourage increasing number of financial products with the bank. ABC bank is incurring credit losses due to its internal credit risk management is not taking an intelligent decision based on the data available. ABC bank needs to find best location to setup new branches and ATMs for better customer reach. Currently the branches and ATMs are either over utilized or underutilized. ABC bank needs to identify top profitable customers and products by analyzing per customer and product profits over period of time like monthly, yearly and lifetime profits.

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Business Intelligence Implementation

Proposed Solution Definition

TDWI, a leading provider of education and training in data warehousing industry defines business intelligence as: The processes, technologies, and tools needed to turn data into information, information into knowledge, and knowledge into plans that drive profitable business actions. Business intelligence encompasses data warehousing, business analytic tools, and content/knowledge management.

Figure 1 : Explaining the flow of Overall Business Intelligence Implementation Source : http://www.emeraldinsight.com/content_images/fig/2870380408001.png

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Business Intelligence Implementation

All the operational data and each Banks business units data need to be loaded into single enterprise data warehouse. This will be data repository where all the data will be standardized across the Bank. The customer data is integrated providing 360 view of customer like how many accounts and what kind of products does he have. Data will be extracted and merged from operational systems and external data sources and gets stored in dimensional modeled data warehouse .In the dimensional data model the measures like balances, accounts etc will be stored in fact tables and the account attribute hierarchies like addresses ,branches ,scores, time etc will be stored as dimensions. This dimensional data model data infrastructure will provide foundation for business intelligence applications to slice and dice data. Business intelligence applications implemented on top of this enterprise data warehouse will be able report data across business units. This business intelligence solution will help crossorganizational decision-support strategy rather than departmental decision-support silos. Business intelligence applications will be able slice and dice data, segment data , aggregate data based on different dimensions. Business intelligence applications can forecast and predict future trends by analyzing historical data available in enterprise data warehouse. As historical data keeps getting collected, the BI systems will get better in forecasting and predicting future trends.

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Business Intelligence Implementation

Proposed Solution Benefits

Banks concern of integrated customer data will be resolved as data is extracted from each of the business unit and external agencies into single locations. BI applications will now allow business users to see how many financial products each customer owns. It will also provide 360 view of customer when was last account opened and balances for each accounts. BI application will also allow to see the historical view of customer the accounts opened in last month, year etc. BI applications will help in better analyze what products the customer will likely buy by analyzing customer behavior on other bank accounts and credit bureau information. Business Intelligence systems will alert the Teller in a branch If the there is a change in customer s direct deposit to sell him 401k rollover investment product. This type of personalized real time marketing was not possible without business intelligence system. Direct Marketing organization will be biggest beneficiary of the business intelligence implementation. Untargeted and high level segmentation will make direct marketing to send lot of mail pieces to customers increasing the cost to market. BI application will allow business users to segment the customer into smaller buckets based on attributes on the accounts .For example the credit card marketing offers can create customer buckets based on credit card spending trends to increase usage like giving rewards points to specific categories of purchases for specific set of people. This kind of business intelligence driven direct marketing campaigns will get better responses than blindly mailing all the customers. ABC banks customer loyalty and attrition can be reduced by using business intelligence application to find best cancellation offer for each of the customer depending on their risk and prof9

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Business Intelligence Implementation

it ratio historically . A credit card cancellation can be provided with a best balance transfer rate or double the points on the customer favorite or largest spending category .Business Intelligence can find customer top 10 spends or at what was last lowest balance transfer rate the customer positively responded. As of cost a acquiring a new customer is a lot compared to keeping an existing customer there will direct saving to reduce the churn factor. Business Intelligence applications can store the behavior of historical fraudulent accounts and find patterns. Business intelligence application can then find these fraud patterns in the whole set of customer s and raise red flags to the business users. For example accounts with foreign big tickets purchases have increased chances of fraud than accounts that have consistently used in one state. Business Intelligence can be used to seek out patterns of suspicious behavior by geographical region, branch etc. Business Intelligence applications will be able to slice and dice customer and transactional data geographically by state, city, zip code. The business intelligence will be able find which customers visit which branches frequently and use which banks ATM more frequently. This information can be used to add new branches and ATMs to better serve the existing customer base and increase the branch footprint. Business Intelligence applications will be able rank customers, marketing channels, financial products by their profitability and cross examined through time dimension. Business intelligence systems will not only give information top profitable channels or products but will tell in which time period these products will be most profitable based on this marketing team can concentrate on those channels and products in that time period.
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Business Intelligence Implementation

Recommendations for Executives

Concluding from the above benefits is for certain that business intelligence implementation is designed to provide a cross functional solution across platforms rather than resolving one isolated issue or departmental issue. Business Intelligence application applies the analysis of aggregated customer information to provide improved customer service responsiveness , to discover cross sell and up sell opportunities and to increase overall customer loyalty. This process increases financial products per customer. Business Intelligence implementation will need initial infrastructure expenditure to store and integrate data historically from different operational and third part data sources. But this expenditure will quickly recuperated by the actual cost saving and better customer satisfaction index. Business Intelligence systems will reduce costs of marketing with more targeted offers and getting better responses. This benefit will increase as more and more historical data is available for historical response analysis. Business Intelligence when applied to credit data and customer data will help the bank to improve credit risk management supplementing useful internal data from other accounts. The expected benefit of the business intelligence is a 30% increase in each customers lifetime value by the end of the third year following the implementation of business intelligence solution.

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Business Intelligence Implementation

Cited References
1. Business Intelligence Roadmap : The Complete Project Lifecycle by Larissa T.Moss and Shaku Atre ( 2003 Ch 1,4 ) 2. Jayanthi Ranjan, (2008) "Business justification with business intelligence", VINE, Vol. 38 Iss: 4, pp.461 - 475 3. Business Intelligence The Savvy Managers Guide by David Loshin ( 2003) 4. Data Warehousing Advice for Managers by Patricia L.Ferdinandi ( 1999 ) 5. Simon Doherty, 2000, CUSTOMER VALUE: GAINING THE COMPETITIVE EDGE, NCR. 6. http://www.techwr-l.com/techwhirl/magazine/writing/softwarerequirementspecs.html 7. http://www.prnewswire.com/news-releases/beiruts-first-national-bank-chooses-misysbusiness-intelligence-solution-as-its-mis-platform-106872013.html 8. http://www.diverseit.co.za/article.asp?articleID=60 9. http://www.qwikbank.com/ 10. http://www.forrester.com/rb/Research/topic_overview_business_intelligence/q/id/392 18/t/2
11. http://www.tdwi.org

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