Learn how financial service organisations operating in the new world of banking can leverage advanced BI to answer big data questions.

1. Navigating the New Banking Landscape
With New Analytical Approaches
WHITE PAPER
Sponsored by: Actuate
A lex K wi atk o ws k i
Ma rc h 2 0 12
www.idc-fi.com
IDC FINANCIAL INSIGHTS OPINION
● With ongoing market volatility creating considerable anxiety
among already fraught-nerved investors, institutions in the wealth
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management and private banking segment need to adapt not only
to a fast-changing operating environment but deliver new
standards of service excellence to customers whose expectations,
needs, and wants are continually rising.
● Customers' awareness and use of new technology is also
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continuing to rise exponentially in line with the development of
new consumer-oriented devices, applications, and services.
Consequently, institutions need to meet the needs of their
increasingly "tech-savvy" account holder by deploying appropriate
services which allow for a greater uptake of self-service. This
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encompasses several facets, including — significantly —
analytical and reporting capabilities, which give improved
insight into financial affairs on a timely basis.
● The benefits of new analytical approaches are not restricted to
external, customer-facing activities. Internal, business-side users
can also gain substantial benefit from leveraging BI tools to
interact with and manipulate data in an intuitive manner through
real-time reporting. Crucially, whereas the provisioning of BI
solutions has historically been prohibitively expensive and
complex, institutions are today able to deliver BI to more parts of
the business in a more cost-effective manner. By broadening the
use of BI (and by using a suitably scalable solution), institutions
drive operational efficiencies, increase transparency, and
enable better decision making (and thus mitigate, negate, or
avoid potentially damaging risks). These are imperative objectives
in the transformed banking industry of the 2010s.
● There has never been a more pressing need for more effective,
wide-reaching BI and analytics capabilities in the wealth
management and private banking sector. The emergence of Big
Data — which IDC defines as "a new generation of technologies
and architectures designed to extract value economically from very
large volumes of a wide variety of data by enabling high-velocity
capture, discovery, and/or analysis" — has given institutions a
major challenge to overcome.
March 2012, IDC Financial Insights #IDCWP06U

2. SETTING THE SCENE
2012 will be another challenging year for the financial services sector.
However, rather than retreading a well-worn path and diagnosing the
various ills and ailments affecting institutions, let us instead
principally concentrate on the alleviating remedies.
In essence, we believe the success of wealth managers and private
banks in the remainder of the 2010s hinges on them having the ability
to perform a "chameleonesque" adaption to the habitat in which they
find themselves operating in at any given period. Moreover, such a
transformation requires institutions to possess the combined strength,
suppleness, and dexterity to perform a finely poised balancing act.
Banks must carefully offset the needs and expectations of regulators,
customers, and shareholders, while ensuring they are sufficiently well-
capitalized to withstand further jolts to the financial system; capable of
protecting market share by launching innovative new products which,
above all, are safe (or at the very least have the dangers identified,
quantified, qualified, and adequately mitigated); explore the uncharted
wealth management opportunities which undeniably exist in key
emerging markets; and to extract maximum value from the IT
systems which power business activities.
BI solutions play a pivotal role in helping institutions adjust to
changing market conditions and achieve the aforementioned poise. At
the heart resides the overwhelming need for bank executives (and
client relationship managers) to be able to make fact-based decisions
(and recommendations) using information drawn from a plethora
of trusted data sources and collated into a suitably visual report
(which is easy to interpret quickly and confidently). To be clear, this
need has not simply arisen out of nowhere in 2012: institutions have
been grappling with the task of optimizing their BI tools on a continual
basis since solutions first came to market more than a decade ago.
What differs now is that the need for more effective, wide-reaching BI
capabilities in the private banking and wealth management segments is
of mission-critical importance, especially in light of the recent industry
travails.
In our opinion, the banking industry's most successful institutions will
bolster their service delivery standards by means of enhancing and
extending BI and analytical capabilities in accordance with the
changing market landscape. While these activities will not serve as the
sole agent for success (other functional, environmental, technological,
and political factors will also be influential to varying degrees),
making a more "intelligent use of intelligence" unquestionably has the
ability to deliver tangible operational and financial benefits.
In this white paper we first describe how institutions operating in an
ever-transforming banking world must deliver exceptional client
service. Secondly, we examine how institutions can successfully
navigate this new banking landscape by making the best possible use
of a BI solution, and the tangible benefits this strategic planning will
afford.
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3. EXCELLENCE IN A NEW BANKING ERA
Empirical evidence indicates that service quality is one of the most
important differentiating factors in wealth management and private
banking. But best-in-class products, investment performance, and
qualitative sound advice without acceptable service quality are no
longer sufficient selection criteria for most high-net-worth (HNW)
clients. To satisfy clients' expectations, institutions must establish
which services are viewed as all-important differentiators, and then
how quality thresholds can be raised to a best-in-class standard.
In 2012, we believe those relationship managers tasked with managing
the financial affairs of HNW individuals need to find answers to a
series of pertinent questions to deliver an exceptional experience.
Therefore:
● How can I allocate more time to my clients with unmet
requirements?
● How can I identify the best cross-selling opportunities?
● Which of my clients are showing signs of attrition risk?
● How can I increase my clients' perception of service quality to
raise the level of overall satisfaction?
● How can I improve the confidence of my clients (and prospects) at
a time when trust in financial services has been significantly
eroded and an unhealthy degree of skepticism abounds among
even the wealthier/wealthiest members of society?
There are also broader considerations for institutions — rather than
individual relationship managers — to ponder. For example, how can
appropriate use be made of digital channels for the provision of private
banking and wealth management services, and what specific tools
and applications must be provided to enable greater client self-
service? One component of this enhanced self-service is the ability to
offer BI and reporting capabilities to clients that wish to gain
greater, faster insight into the performance of their investment
portfolios (and any other financial products).
The provision of an excellent experience does not rest purely on
answering these questions. Of equal importance is the ability to reduce
risk and ensure regulatory compliance, thereby insulating valuable
HNW customers from potential losses or asset portfolio
underperformance. Importantly, whereas such activities were once
upon a time, not so long along viewed as the sole preserve of those
employees whose business cards featured the words "risk and
compliance" on them, in 2012 the task of identifying, mitigating, and
nullifying risk needs to be the responsibility of everyone within an
institution.
Today, the CEO is expected to play a far more prominent role in risk
management, as sponsor and advocate of integrated enterprisewide
©2012 IDC Financial Insights #IDCWP06U Page 3

4. risk reduction programs. They are required to lead by example, by
playing a prominent role in the creation of a robust risk-based culture
(where managing and reducing market, credit, and operational risk
becomes an accepted, ingrained responsibility for employees in every
strata); assuming responsibility for regulatory compliance; and
providing the final, crucial check and balance when signing off key
business initiatives, such as the implementation of new, improved BI
solutions designed to address the issues associated with risk,
improve decision-making, and raise operational efficiency.
Importantly, the use of these solutions must extend to a far wider
extent than has been seen historically.
DELIVERING BETTER BI CAPABILITIES
From our perspective, business-led analytics and BI solutions must —
without delay — become more pervasive within institutions in order to
create a stronger culture of risk avoidance and averseness. Since
inception, BI applications have predominately been used by a narrow
band of internal niche specialists (those with a "business analyst" job
title, for instance). Given the acute pressure banks currently find
themselves under in the market, and with trading conditions unlikely
to improve markedly in the long term due to an anemic economy,
extending and broadening the reach of BI in the quest to drive
operational efficiencies, increase transparency, and enable better
decision making is eminently sensible.
As risk should be every employee's responsibility, and raising service
standards is vital, so suitable tools must be provided to achieve these
objectives. Ergo, a BI solution has to be capable of scaling to support
an increased number of employees without a detrimental impact on
application performance (evidenced by slow or erratic running and a
lack of quality in the reporting of integrated data). And, as mentioned
elsewhere, giving clients the ability to use a dedicated BI application
for self-service account management/monitoring purposes also helps
to deliver the improved user experience which all institutions are
striving to achieve on a sustained basis.
To achieve this scalability and flexibility, institutions must be willing
to embrace alternative approaches to deploying BI and analytics
technologies. A premises-based solution (i.e., where the bank owns
and maintains a dedicated server and software licenses provided on a
per-user basis) is no longer the only option available: cloud
implementations (be they private or hybrid) and on-demand
services give banks the ability to push BI capabilities quickly and
cost-effectively into new functional areas. That is not to say that on-
premises has had its day: far from it in fact. Rather, this demonstrates
that at a point when IT investment budgets are under intense strain, the
delivery of new solutions and an improved user experience can be
performed in a creative way to maximize the available financial
resources.
One further point merits mention. Following the emergence of Big
Data, managing and interrogating information has assumed a whole
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5. new degree of significance and mission-critical importance. Big Data
relates to a constant stream of information which must be monitored
and analyzed for operational purposes. This includes both structured
and unstructured data, with social interactions, mobile devices,
facilities, equipment, R&D, simulations, and physical infrastructure all
contributing to the flow. It encompasses hardware and software that
integrates, organizes, manages, analyzes, and presents data that is
characterized by the "four Vs" — volume, variety, velocity, and value.
Big Data has the potential to unlock latent operational and financial
value, but extracting maximum value is far from easy. Indeed, we
believe financial institutions are struggling to tackle the challenges
presented by Big Data. Existing disk-based storage solutions are being
exposed as wholly inadequate when it comes to sifting the information
which flows rapidly along the Big Data stream in real time or near real
time.
Solving — or at least getting a handle on — Big Data is a major item
on the agenda in 2012. Tackling Big Data is not a straightforward
matter of implementing a single system. Rather it involves a
combination of the right technologies and tools, the right workflows
and processes, and adequate analytical capabilities. Ultimately, it will
require extensive investment in datawarehousing, data integration, BI,
data visualization/reporting, and business-led analytics.
RECOMMENDATIONS
Actions to Consider
We recommend institutions involved with the provision of wealth
management and private banking services perform the following
actions:
● Extend BI solutions further into the organization beyond the realm
of the dedicated business analyst and onto the desktop of the client
relationship manager.
● Empower customers by creating and deploying tools that can offer
enhanced self-service BI and reporting capabilities for those who
want to create potential scenarios.
● Recognize the need to improve BI and business-led analytical
capabilities in accordance with addressing the challenges
associated with Big Data.
● Avoid sacrificing innovation on the regulation and compliance
altar. Institutions can still innovate — in terms of products,
services, and underlying technologies — providing the risks are
understood and managed effectively. BI can undoubtedly help map
out this "journey of discovery."
©2012 IDC Financial Insights #IDCWP06U Page 5

6. ● Investigate the effectiveness and scalability of existing BI
solutions. Where this investigation reveals inherent gaps or failings,
consider the implementation of a new toolset.
● Avoid paying lip service to the notion of service excellence.
Instead of merely talking a good game, institutions must deliver
the promised user experience by leveraging BI technologies to
their best advantage.
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