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High-Impact Business Intelligence Opportunities in the Financial Services Industry

Financial services firms that are business intelligence leaders obtain competitive advantage by leveraging information to acquire and retain profitable customers in order to improve business performance and financial results.


This article originally appeared on the BeyeNETWORK

The financial services industry is central to the economic well-being of billions of people around the globe. From mass-market products such as debit and credit cards, to highly customized corporate services such as investment banking, to insurance products that protect our assets, to products that allow us to save for the future, the financial services industry offers a wide range of products and services to many different types of customers.

Over the past decade, the industry has become more complex. In the U.S., deregulation has spurred consolidation and creation of diversified financial services firms. This has created opportunities to compete based on economies of scale in sales, marketing, distribution and IT and on the advantages of being a “one-stop shop.” Aside from the challenges of convincing customers of the merit of this value proposition, there is also the challenge of operating as a one-stop shop when many of the fundamental business processes and systems are product specific. As a result of these trends, and due to the sheer numbers of customers served, financial services firms face substantial challenges in managing relationships with customers and in managing varied businesses that require different skills, cultures and business models.

To add to the complexity, consolidation and globalization in the financial services industry forces diversified firms to compete with very sophisticated competitors across regions where one or the other may have cultural advantages. At the same time, the global regulatory landscape is varied, creating a fragmented marketplace with focused local competitors and geographic and product diversity. The requirement to compete globally against both diversified competitors and focused competitors further adds to the challenges of the business. What’s more, commercialization of the Internet has created a dynamic global distribution channel that makes prices among competitors more transparent, creates ever higher expectations for customer service and creates further price pressures for the many commodity products offered.

These general cross-cutting drivers, trends and industry characteristics set the context for financial services industry uses of business intelligence (BI) to improve business performance and financial results. In order to have an impact, BI uses must be integrated with the core business processes that make a difference. This integration can be at the operational level (e.g., credit scoring and fraud detection uses) or at the strategic level (e.g., determining optimal product offerings and product mix over time). While each specific company would be very well served to evaluate its BI opportunities through a structured, business-driven approach, a very useful starting point is to evaluate the applicability of cross-cutting BI-driven improvement opportunities, or BIOs. Figure 1 provides a list of BIOs that are appropriate for financial services firms, given industry drivers and trends and given what early adopters have done with business intelligence.


Figure 1:
Global Financial Services Industry Drivers, Trends and BI-Driven Improvement Opportunities
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The cross-cutting drivers, trends and industry characteristics were identified via our consulting experience in the financial services industry and via secondary research techniques such as reviewing annual reports and case studies. What we’ve found is that whether a company is a global diversified competitor like Citigroup or HSBC or a more focused competitor like MasterCard International, in many cases there are common competitive/business impacts associated with the drivers, trends and industry characteristics. The linkage between drivers and trends and the general competitive/business impacts can be seen in Figure 2.


Figure 2:
Business Impacts of Industry Drivers, Trends and Characteristics
Mouseover to enlarge

These competitive/business impacts, in turn, create a clear impetus to use business intelligence to do a better job of managing across geography, customer segments, products and distribution channels to improve performance and business results. These linkages are shown in Figure 3.


Figure 3:
Competitive/Business Impacts of Industry Drivers, Trends and Characteristics Create BI-Driven Improvement Opportunities (BIOs)
Mouseover to enlarge

In arriving at these research-based perspectives, we noticed that while the specific application of business intelligence at a given firm might differ in terminology and relative importance, the ways that business intelligence can be used to improve business performance and financial results are fairly common across the major segments of the financial services industry. For example, using business intelligence to personalize interactions with customers across web, call center and direct mail touchpoints is a common strategy for leading firms in the investment and asset management market segment and for leading firms in the property and casualty insurance market segment. From this, we have come to believe that since the BI-driven improvement opportunities for financial services firms are fairly generic to the industry, what matters is which opportunities are most important for a given company at a given point in time and at a given point in its BI maturity. Further, the question of relative competitive position comes into play. To gauge this, we must look at specific examples of how business intelligence is being used in the financial services industry.

Business Challenges and Industry Uses of Business Intelligence

Successfully managing a complex mix of customers, products, channels and markets to achieve superior business performance and financial results requires a strong customer focus and consistent attention to operating fundamentals such as expense and risk management. These critical success factors drive the need for cost-effective core processes, which creates opportunities to leverage business intelligence in the ways suggested in Figures 1 and 3. We will describe and illustrate customer-oriented and operations-oriented BI-driven improvement opportunities (BIOs) in the following sections.

Customer-Oriented Business Improvement Opportunities

Customer-oriented BI opportunities are a good way to illustrate more specifically how business intelligence is being used by financial services companies today to achieve competitive advantage. Due to the sheer numbers of customers served by any major financial services firm, there are fundamental challenges in achieving meaningful customer segmentation, understanding customer profitability and lifetime value, building personalized relationships, executing and measuring returns on multichannel direct marketing campaigns and integrating customer information to obtain a complete view of the business relationship with a given customer. Further, given that information about each customer may reside in several different product-oriented business systems, such as a consumer loan system, an investment management system and a demand deposit system, there are data integration challenges that impede the use of sophisticated analytical techniques and advanced customer-facing business processes. Our research and experience suggest that there are proven customer-oriented BIOs that can be leveraged to overcome these challenges and improve business performance and financial results.

Case Study: RBC Financial Group1

RBC Financial Group is a diversified financial services firm, which at the time of the case research had 23 million retail accounts, 700 products and served 10 million personal, commercial, corporate and public sector customers in North America and around the world. RBC Royal Bank, which accounted for 50% of RBC’s cash net income, had an extensive distribution network that included 1,300 branches, 4,800 ATMs and online banking, though which it served 1.4 million online banking customers.

The competitive landscape for RBC Royal Bank has changed from what had been an oligopoly among the six largest Canadian banks to an arena in which large multinational competitors also compete. Further, the commercialization of the Internet made it possible for non-traditional Internet banks to enter the fray. To win in this environment, RBC Royal Bank determined that it needed to focus on customer needs as a differentiation point.

The need to be truly customer focused led to business process changes enabled by business intelligence. The ultimate goal was to bring together in one place a view of all contacts, transactions, accounts and interactions with each customer. This enabled RBC Royal Bank to leverage business intelligence for:

  • Advanced customer segmentation;

  • Deploying a 360° view of customer information to inform interactions with customers via branches, call centers and direct mail;

  • Determination of customer profitability and lifetime value and usage of those measures to drive customized marketing campaigns, differentiated pricing and differentiated customer service; and

  • Development of sophisticated predictive models for credit risk and risk of customer defection, which enabled differentiated risk-based pricing and differentiated customer service.

More broadly, the use of customer-oriented business intelligence enabled RBC Royal Bank to create customer intimacy – which it saw as a combination of trust, reassurance and the feeling that the bank knows them, understands their needs, recognizes who they are and values their business.

Other Industry Uses of Customer-Oriented BI to Improve Performance

  • Charles Schwab uses customer-oriented business intelligence to understand customer profitability and drive differentiated prices and services.2

  • A leading global diversified financial services firm uses leading-edge customer-oriented business intelligence to cross-sell and up-sell its products via multichannel direct marketing campaigns reaching more than 250 million customer contacts per year.

  • A DecisionPath customer in the financial services industry uses customer-oriented business intelligence to improve customer service.

  • A leading Indian diversified financial services company uses customer-oriented business intelligence to ensure high-quality customer relationships and to maximize the value of individual customer relationships.

  • A DecisionPath customer in the financial services industry uses customer-oriented business intelligence for improved customer segmentation – by assets under management and customer profitability – to retain high value customers via differentiated services.

Business Intelligence Opportunities

The financial services industry affords many opportunities to utilize business intelligence for competitive advantage. Financial services firms that are BI leaders are increasingly finding opportunities to obtain competitive advantage by leveraging information to acquire and retain profitable customers in order to improve business performance and financial results. They are also becoming increasingly adept at optimizing profitability and mitigating financial risk through differentiated pricing. It seems clear that financial services companies that are laggards in the BI arena will increasingly need to step up their BI capabilities to achieve competitive parity with BI leaders.


  1. The information presented is synopsized from Harvard Business School Case 9-102-072, Customer Profitability and Customer Relationship Management at RBC Financial Group

  2. The information presented is synopsized from Harvard Business School Case 9-106-002, Understanding Customer Profitability at Charles Schwab.


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