2016 was a great year for analytics throughout many industries. The financial industry seemed to especially embrace analytics and take the necessary first steps towards becoming a more data-driven industry.
Back in the beginning of 2016, I published an article titled “5 Reasons to Invest in Data and Analytics in 2016”. Most (if not all) of the points mentioned are just as true today as they were then. However, in the spirit of continuous improvement, I’ve updated the list for 2017 to reflect the changing industry and analytics landscape.
Without further ado, here are your top five reasons to invest in data analytics in 2017…
1. And you thought you had a lot of data sources last year…!
The volume of data is always worth considering. But what many fail to consider – until it’s too late! – is how disparate your data is becoming. In 2016, you likely added several new data sources to your organization’s data inventory.
How many of these data sources are siloed from the rest of the organization’s data?
As you bring on a new CRM system or LOS or digital banking platform or whatever new software your organization acquires, consider how that data will become integrated with the rest of business’ data. Make that a priority during the vendor/software evaluation process instead of an afterthought post-implementation.
2. Your data strategy affects WAY more than just your data.
An organization’s data strategy is:
A comprehensive and actionable foundation for an organization’s ability to harness and leverage data.
Your data strategy, at a bare minimum, must include:
- A strategy defining your data analytics goals
- A tactical roadmap describing how you will accomplish the analytics goals outlined above
- Plans, tactics, and processes to develops analytics skills and create a data-driven culture
But your data strategy doesn’t exist on an island of its own. In fact, your success (or failure) with data strategy will impact so much more than just data.
Is improving your efficiency ratio on your strategic plan for 2017? Better data (read information) can help with that.
Is developing a digital strategy on your strategic plan for 2017? Don’t you think a strong analytics platform to understand your members and their banking habits would support a digital marketing initiative?
If you take away one thing and one thing only from this article, make it this:
Analytics and a strong data strategy will enable greater success in every single one of your other strategic initiatives.
3. The cost of inaction is (truly) greater than the cost of action.
I wrote a post last year talking about how analytics would soon become a competitive necessity for the financial industry. This is as true today as it was then.
There are still many competitive advantages that can be gained in most markets/regions through a greater maturity with analytics. However, as the analytics maturity of the industry rises, the value of the competitive advantage shrinks.
We are nearing a state where the cost of inaction with analytics is greater than the cost of action.
This is a good news – bad news situations. The bad news? Failure to act quickly will limit the potential competitive advantage spread you could achieve within your market.
The good news? Vendor competition and growing expertise in the industry have made high-quality analytics platforms drastically more affordable.
Thought you needed to spend millions to get a strong analytics platform? Think again.
4. Efficiency, efficiency, efficiency
I’m still surprised at how this is the best-kept secret about analytics:
A strong data strategy and analytics platform can drastically improve your organization’s efficiency.
What do I mean? Think of how many hundreds (more than likely, thousands) of hours your staff spends manually merging data from various sources, importing into a spreadsheet, producing charts and graphs, etc.
The average financial institution we worked with last year (for scale comparison: approx. 200-400 employees and 10-20 branches) had well over 3 FTEs of work that could be automated through the proposed analytics solution. At the $500M+ peer group average of roughly $77,000 compensation and benefits expense per FTE, this automation amounts to, at a minimum, of a $231,000 per year opportunity cost savings.
And that’s just scratching the surface on the easy stuff that we could identify during a few days onsite visiting with a client.
Want to improve your organization’s efficiency? Ask how data analytics can help.
5. The industry has some experience with analytics now
Let’s be honest, financial institutions tend to be pretty risk averse. Especially when it comes to new technologies or ideas, the “wait and see” approach is more often than not the method taken. By now, however, there have been enough organizations that have taken the leap into the world of analytics that this isn’t a “new” idea. There are some great use cases from financial institutions across all asset classes on how they’ve had success.
There are also some stories of how analytics hasn’t worked.
This isn’t all bad.
Treat those stories as a blueprint for what to avoid when rolling out your own analytics programs and data strategies. Every experience – whether it ended in success or failure – is an opportunity for the industry to continue to grow its analytics competency and maturity.
If you belong to a more risk-averse organization, I’d suggest reaching out to colleagues at other organizations that have started to leverage analytics. You might be surprised to find out that it isn’t quite as scary as some think.
Take a look at an article we wrote last September titled “What’s Holding You Back from Being Data-Driven?”. In that post, I explored some of the common misconceptions around data and analytics that tend to restrain organizations. It’s worth a look to see if some simple clarification could resolve lingering concerns.
What’s in store for 2017?
2017 is going to be a big year for the financial industry. From digital marketing innovations to improved data analytics maturity, this should be a fun year.
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