Sponsored by

An Action Plan for Creating Real Competitive Advantage Through DataBanks globally are betting big on artificial intelligence and machine learning to give them the technological edge they need to offer more real-time, personalized and predictive banking services. A framework will help differentiate the winners not only in these early days of the technology, but also in the long run for sustained advantage in the intelligence era.

Connected Intelligence the World’s Best BanksIN

An IDC InfoBrief F E B R U A R Y 2 0 1 9

IDC InfoBrief Connected Intelligence in the World’s Best Banks 2

Despite failures in ensuring customer trust, banks are still looked

at favorably in protecting digital trust

IDC ResearchBanks, which through their own policies have historically held better trust with their customers, stand to benefit more than banks with security breaches or policy mishandlings. Such banks stand to create, on average, 20% extra revenue from data exploration

Double-digit growth of investments into everything intelligence

IDC PredictionBy 2021, banks globally will have seen 75% year-on-year growth in investments in intelligence. Major areas of growth: security, decision making and operations

Banks are expected to build on top of their “intelligence base”

IDC Research on Intelligent Base•By 2020, 75% with single

customer views

•By 2021 40% of banks with full-fledged data scientists

•By 2020, 65% with broad analytics capabilities and 30% with more advanced capabilities such as predictive HR models

Banks expected to skill up in intelligence

IDC Research•By 2020, banks will seek to resolve

the skills issue in intelligence by:

•Work with Fintechs (Intelligence-as-a-Service)

•Citizen data scientist

•Visualization

•Devolve decision-making to front-lines

•Edge analytics

Fast-Start in Connected Intelligence: 8 Trends Reflect Banks’ Readiness

Source: IDC 2018

The digital customer will lead to more personal, location-based

and real-time services

IDC PredictionBy 2022, 60% of global customers will have opted in for a location-based service provided by their bank and real-time automated customer services will be offered by 50% of global banks

The rise of virtual ecosystems: customers moving towards online

platforms, with banks in the center of lifestyle services

IDC PredictionBy 2021, 40% of global banking customers will have associated or linked their primary bank account with another online service provider (e.g., ecommerce or social media)

1

2

3 4 5 6

Banks learning to best take advantage of leaps in advancements

regarding infrastructure

IDC PredictionBy 2022:

•Real-time bank-to-bank payments will be in place in 50% of global banking markets

•Overall infrastructure capacity in banks will have increased from today’s average by 250%

Huge shifts toward digital and mobile engagement drive

banks to seek intelligence to anchor how they engage with customers

IDC PredictionBy 2021, 30% of global customers will have interacted digitally with an intelligence-based assistant – without knowing that it was not a human they were communicating with

7

8

IDC InfoBrief Connected Intelligence in the World’s Best Banks 3

9 Pitfalls to AvoidAs they move towards an intelligent future, banks face many of the same issues hindering their progress.

Lack of current and accurate data leads to

distrust of data. The goal is to have

as many parts of the organization use

the data.

Banks cannot cope with the explosion of data from a profusion

of new data sources: Edge, new

channels, new types of interactions,

and third-party data providers.

Integration of data is expensive and

inefficient. As a consequence,

data remains in silos.

Systems of record remain separate from systems of

engagement. They also differ in terms of

quality and usability.

Insufficient intelligence and data science

means existing knowledge

does not give way to new skills in artificial

intelligence and machine learning

(AI/ML).

Lack of curation of new models,

algorithms, techniques means they will hardly be

used.

Models and algorithms need to demonstrate

their usefulness in multiple scenarios.

Black-box models also mean decisions will

be suspect.

Lack of short-term wins within the intelligence roadmap or not

having a business case aligned to a

compelling business strategy leads to

disappointment and abandonment

Leadership beyond the initiation phase falters and fails to

change internal data culture. The right

analytical skills with both business and

technology cannot be found

POOR DATA QUALITY

TOO MANY DATA SOURCES

INEFFICIENT DATA INFRASTRUCTURE

DATA DIS-AGGREGATION

OLD ANALYTICS NOT READY FOR

NEW

WEAK MODEL GOVERNANCE

NON-TRANSPARENCY

OF MODELS

INTELLIGENCE LACKS STRUCTURED

GOALS

LEADERSHIP AND PEOPLE DEFICIENCIES

1 2 3 4 5 6 7 8 9

IDC InfoBrief Connected Intelligence in the World’s Best Banks 4

9 Ways to Bridge the Intelligence Gaps in BankingHolistic management of intelligence initiatives allow banks to avoid these pitfalls.

Invest in easy-to-maintain data

platforms that enable more staff to gain

customer insights and making fact-based

decisions

Bring disparate sources of data into a data platform that

can stage configurable, interactive

dashboards, create customer clusters to define new segments

Create a new unified data infrastructure that enables more agile analysis and

better collaboration

Integrate data from all major systems of

the bank, without hardwiring such

integration; source from within as it

happens and also from third party

partners

Implement an analytics engine

that accommodates all analytics tools, techniques and

capabilities; resolve identity across all

products to ensure a unified view

Model governance that guards against

bias and degradation of models;

continuously rebuild, refactor and redeploy models based on new

learnings

Model governance that ensures transparency,

explainability of models

Drive and uphold a culture of data and

intelligence that becomes embedded

within the organization beyond simply project

champions

Ensure that there are both realistic

and feasible short-, medium- and long-

term goals for the business with

escalating potential benefits if realized

POOR DATA QUALITY

TOO MANY DATA SOURCES

INEFFICIENT DATA INFRASTRUCTURE

DATA DIS-AGGREGATION

OLD ANALYTICS NOT READY FOR

NEW

WEAK MODEL GOVERNANCE

NON-TRANSPARENCY

OF MODELS

INTELLIGENCE LACKS STRUCTURED

GOALS

LEADERSHIP AND PEOPLE DEFICIENCIES

1 2 3 4 5 6 7 8 9

IDC InfoBrief Connected Intelligence in the World’s Best Banks 5

Banking Gets More PERSONAL, REAL TIME, PREDICTIVE: The Building Blocks of AI and ML

Mobile devices totally change customers’ expectation of one-to-one engagement

When interaction is closer to customers and analytics more prevalent, providers must offer relevant, personal contact

AI also has significant impact on wide breadth of interactions with positive customer appeal

Real-time decision capabilities that drive higher conversion rates

Instant re-calculation of pricing and next action models

Faster response to customer service issues and opportunities

Real-time fraud detection and lower losses by spotting fraud early

Refine understanding of customer behavior and preferences

Massively improve portfolio risk with better models

Develop higher rates of retention and upsell

Continuously adapt and learn

THE BUILDING BLOCKS

Data capture with connected

channels

AI, ML and advanced

analytics to churn through and

create value from data

Enablement of bankers and

customer service with actionable

insights

Natural language processing

(NLP), keyword mining, sentiment analysis and AI to

empower “person-less”channels of

engagement

THE BUILDING BLOCKS

The introduction of instant-banking, where models are executed in real time to support decision making

Real-time monitoring of

“data in motion” like credit card

spend

Edge analytics performed as

close to the data assets possible

Scale and reliability

THE BUILDING BLOCKS

Unified data from multiple sources

Dynamic models for cross-sell

across channels

Systems of insights for

developing and enabling “next best actions”

Actionable Intelligence

that improves relevance and adaptation of

banking products and pricing

The opportunities of

PERSONALIZATION The opportunities of

REAL TIME The opportunities of

PREDICTIVE

IDC InfoBrief Connected Intelligence in the World’s Best Banks 6

Relevant and timely advice Identifying the best possibilities and options for the customer at the

right time

Omni-channel optimization Engaging with the customer at the best possible channel, whether it

be online, mobile, branch or other formats

Integrated AI financial planning By managing a holistic view of the customer’s financial activities, the

AI engine is able to offer integrated financial products and solutions

Automated orchestration of business processes Streamline business operations with automation of work allocation,

allowing manual exceptions on a needs basis

Data to and from the frontlines Fast collection and ingestion of data soon after it is collected — and

easy access to data when it is needed

Optimized risk mitigation models with predictive analytics-based tools

Explore vulnerabilities and high risk-based outcomes using algorithm-based models

Price for risk in real-time and on a 24x7 basis Value at risk reporting — interpretation as a summary measure

of risk and consistent treatment of risk across different financial instruments and business activities

Reduced effort to resolve adverse incidents Expedite processes to detect false positives and work on legitimate

adverse incidences (fraud, IT breaches, non-compliance)

A Whole Spectrum of AI CapabilitiesPredictive analytics, ML and AI will enable transformation in banks, creating capabilities everywhere — from customer interactions, to redesigned business processes, to new risk and pricing models. Algorithmic banking can be brought everywhere!

Expectations for a World of Experiments in AI

1, 3 Source: IDC FutureScape: Worldwide Financial Services 2019 Predictions, IDC #US43052618, November 20182 Source: Robotic Process Automation in Asia/Pacific Financial Services: Key Learnings from 10 Early Adopters, IDC #IDC #AP43545718, February 2018

25% of financial institutions worldwide will be processing transactions

initiated by third-party digital personal assistants or will be capable of doing so, driven by open-banking and AI.1

50–90% reduction of turnaround time across banks

globally according to early indicators , with new automated intelligence tools, turnaround time to complete high-impact business processes (credit lending, insurance claim handling, origination and KYC) can decrease significantly.2

45% of all banks will have invested in automated governance, risk

and compliance (GRC) solutions to improve operational performance and substantially reduce the operating expenses associated with manual processes.3

B Y 2 0 2 2 F A S T E R B Y 2 0 2 1

New capabilitiesCUSTOMER ENGAGEMENT

New capabilitiesBUSINESS PROCESSES

New capabilitiesRISK MANAGEMENT

IDC InfoBrief Connected Intelligence in the World’s Best Banks 7

5 Intelligence Capabilities in World’s Best BanksIn 2019, the world’s top banks will lead on capabilities rarely seen in the industry.

Real one-to-one marketing

Augment customer engagement

with contextual conversations

Real 24x7, enterprise-wide

risk management

Offers in contextUse of real-time

insights, converted to action where action

matters

Analytics when it matters

Unified channels, insights and

actions beyond simple

channel integration

1 2 3 4 5

Uses real-time information on key events and incidents affecting the customer through a simplified and automated process. A visualization

platform helps create “timely conversations with our customers across channels” and delivers 3X

greater offer acceptance on offers.

Uses real-time data from more than 20 jurisdictions for accurate, real-time assessment of liquidity and

other risk exposures.

Partners with retailers to provide real-time offers to credit card users

based on location and activity, so that the bank knows in real time “when customers use their card, where they use it, and why —and

act on that information, also in real time” – Leading to campaign capacity

increases by 10x.

Reduces cost of fraud management by dramatically reducing false alerts

and improving the adjudication process to make investigators

more productive. Client satisfaction improvements led to a client flow

increase of 10%.

Ensures seamless customer engagement across all channels so that a customer can start and

complete interactions across many channels “with full security and

without losing any data”.

ASIA/PACIFIC SUPER-REGIONAL BANK

U.S. FINANCIAL SERVICES INSTITUTION

IDC InfoBrief Connected Intelligence in the World’s Best Banks 8

Platforms as a Foundation for the Future To sustain competitive advantage in intelligence, banks have to build augmented platforms of data and decisions that bring together data assets with intelligence capabilities.

The principles in building the DECISION PLATFORM

Progressively sophisticated analytics High scale; low latency Seamless omni-channel integration Embed test and learn Automated and continuous adaptation

The principles in building the DATA PLATFORM

Pervasive data connectivity Intuitive data management Distributed data discovery and insights Foundational data science Seamless activation of audiences D A T A P L A T F O R M

D E C I S I O N P L A T F O R M

Eliminate Data Silos

Create Holistic Customer

Views

Broaden Customer Insights

Enhance with Predictive Analytics

Select and Manage Customer

Segments

Integrate with Engagement

Channels

Assemble Data in Context

Intelligently Set Objectives

Embed Decision Algorithms

Trigger Next Actions

Design and Execute Experiments

Continuously Refine Intelligence

IDC InfoBrief Connected Intelligence in the World’s Best Banks 9

What Distinguishes the World’s Most Intelligent Banks?Success in intelligence means success in many new areas.

Sense-and-response

Predictive capability and proactive outreach

Pragmatic use of data and insights where they are needed

Integrating data across multiple sources and multiple personae across the institution

Effective data visualization and discovery tools

Advanced analytics for creating new models and fueling the development of AI

Bringing “context” into customer experience, whether it is a point of proactive or reactive engagement

Deploying models into streaming decision engines for personalized real-time engagement

Operational effectiveness to deploy analytics resources where they are needed

The emergence of citizen data scientists across the bank

Transparency and explainability of models and algorithms

Lay a foundation for AI to be built on current analytical capabilities, with ongoing effort to build data platforms and analytics engines for the entire enterprise, not just one or two departments.

Essential Guidance

This IDC InfoBrief was produced by IDC Custom Solutions. Copyright 2019 IDC. Any IDC information or reference to IDC that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC. For more information, email: AP_Permissions@idc.com

AI, as part of the continuous improvement of a bank’s analytics intelligence, has immense potential to generate insights and actions from significantly vast, diverse, and multiple data sets. It has the potential to accelerate the competitive advantage of a bank.

Build sustainable competitive advantage in intelligence by ensuring intelligence is trusted, easy to use, and demonstrates value.

Scale up and augment analytical capabilities based on current, reliable, accurate, and trusted sources of data.