‘Data analytics can play a huge role in driving transformation for banking’

Data analytics can play a “transformative” role for the banking industry, which is increasingly becoming digital and seeking new ways to provide personalised experiences to customers, improve products and services and manage risks and online frauds more effectively, said tech executives of leading banks during a panel discussion “Data and Analytics at the core of transformation” at the FinServ Innovation Summit 2023 organised by Mosaic Digital and TechCircle on April 27. 

“We are still a very low GDP per capita economy. There are a lot of problems to solve.

This transformation is about how fintech and banks and different kinds of banks can work with each other to deliver value to customers, bring down the cost of servicing, and increase the revenue for a customer. And I believe data analytics can play a huge role in driving these three transformations,” said Balaji Narayanamurthy, President & Head BIU, Axis Bank Limited, one of the panelists. 

Narayanamurthy said that as more banks are becoming digital they are trying to figure out ways to maintain that personal touch. However, he also acknowledged that data analytics-driven personalisation is still in the early days. “I wouldn't claim that banks are anywhere close to personalised in their digital interactions.”

He noted that the next frontier for banks is really about offering that experience.

“So, people can find what they want without digging through menus and they can find the banks conversing with them in a manner that a person would. That's possible. That's possible in the world of ChatGPT. But it will only be possible with data,” he added. 

Abhijeet Bhattacharjee, CIO, Utkarsh Small Finance Bank, who was also a part of the panel, pointed out that banks have been using data analytics for a while. In the last 5-6 years firms have digitised anything they could see and are sitting on a large pile of data with no idea of what to do with it. 

“What has changed now in the last 2-3 years, is that we have realized that data has multiple facets and that needs to be looked into. Now you can acquire a customer based on browsing history or choices they are making in their shopping carts. These are the cross-referential information which is bringing out new nuances to get the services and everything better,” said Bhattacharjee. He attributed this change in approach to new-age fintechs. 

Bhattacharjee believes that for personalization and user experience-related use cases, banks have a lot to learn for the next 10 years from the e-commerce companies to at least reach at some level. “We still don't know how to use the data, and there are still a lot of gaps,” he added. 

Though personalisation and improving services are major focus areas, banks are also using data analytics for risk management and lending. 

“As banks you want to lend as well as you want to get your money back. So, you want to assess the customer who can pay you back. Data analytics plays a key role not just in identifying customers, but also in terms of managing that risk through the life cycle of the loan,” said Narayanamurthy. 

He explains that earlier when money was in the locker there was physical security. But once the money is largely digital and can be accessed through digital means, cybersecurity becomes important.  

Narayanamurthy has a point. BFSI is one of the most cyber targeted sectors in India. According to an October report by cybersecurity firm CloudSek, India's BFSI faced the highest number of cyberattacks in Asia in the first half of 2022. 

Fraud management is also a big area, noted Narayanamurthy, adding, “It's not just genuine customers that apply for a loan. If you give out loans digitally, you will have all kinds of threat actors applying for it.” 

Further, banks in India are also looking at new formats of data such as voice to understand their customer requirements. 

“We run a lot of voice analytics to get a lot of insight from it. These are specific use cases for us, but I think for a bank specifically, instead of looking into only the data as a binary, there is a lot of unstructured data that is available within the banking ecosystem,” said Bhattacharjee.