Data-driven Innovation in the European Banking Industry

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As banking becomes increasingly commoditized, European financial institutions find it difficult to compete on revenue growth only and turn to technology in search of other competitive advantages. The banking industry is therefore resuming to invest in Information Technology (IT), with specific emphasis on data-driven technologies, such as Big Data and Analytics (BDA) solutions.

From brand reputation to customer centricity, from regulatory compliance to the need to re-focus on core-banking, BDA are helping the banking sector to successfully tackle a series of unprecedented challenges. By focusing on a selected number of BDA deployments across some of the most representative banks in Europe, our research shows that BDA implementations are becoming more and more popular among a growing number of banking institutions and are bringing tangible benefits in several areas of the industry value chain. In particular, BDA projects are implemented by European banks in at least three fundamental spaces:

 Operational efficiency and intelligence, where a new generation of analytics can be used to focus on data from unstructured sources, offer visibility into business processes, events and operations as they occur and provide banking institutions with new possibilities to send timely alerts, update management dashboards, offer incentive to churning customers, or prevent fraud.

 Customer experience, where Big Data and Analytics technologies can help banks to better engage with their clientèle, predict reactions to marketing campaign, and offer a more personal and more targeted customer relationship.

 Risk management and compliance, where Big Data and analytics can be used to monitor customer behaviour to detect suspicious activities, increase data accuracy, reduce errors and react to performance issues in time and well before in-bound customer complaints.

There is no doubt that BDA is having a positive impact on Europe’s banking industry. IDC estimates that the significant reduction in time spent for trouble-shooting and reporting could lead to approximate savings of 1.5 billion Euro per year in human resources-related costs in the area of operational efficiency alone. In customer experience, BDA technologies could help banks obtain yearly savings of 3 billion Euro through the sole increase of marketing campaign efficiency. Another half billion Euro in savings could be achieved thanks to an improvement in fraud detection and risk management processes. All in all we estimate that BDA-related improvements could have a positive impact of at least € 5 billion per year on the European banking industry in saved costs alone. Conversely, Big Data could also help European banks expanding their customer base and generating newer revenue streams by providing banks new information sources to cut down on the unbanked individuals - one of the few growth avenues left for the mature European banking industry. A conservative estimate by IDC reckons that 10 million of new customers could generate up to EUR 4.0 billion of additional revenue for EU banks per annum.

As BDA technologies mature, banks will learn how to apply them to improve their businesses. Beyond the use cases detailed here, in the near future banks will find new seams of data and new reasons to analyze them; new opportunities of collaboration with other industries (e.g.: the retail sector) will be experimented, thus allowing smart, targeted offers to reach the right customers at the right time. The selling and sharing of data is likely to proliferate as other industries find ways to serve their customers through their relationships with a banking institution, thus opening up new streams of revenue for banks and other players alike.

IDC&Open Evidence Data-driven Innovation in the European Banking Industry, European Data Market Study, April 2015.