BI in Banking and Finance_Predators

8/7/2019 BI in Banking and Finance_Predators

http://slidepdf.com/reader/full/bi-in-banking-and-financepredators 1/18

qwertyuiopasdfghjklzxcvbnmqwerty

opasdfghjklzxcvbnmqwertyuiopasdfg

klzxcvbnmqwertyuiopasdfghjklzxcvb

nmqwertyuiopasdfghjklzxcvbnmqwe

yuiopasdfghjklzxcvbnmqwertyuiopa

dfghjklzxcvbnmqwertyuiopasdfghjkl

cvbnmqwertyuiopasdfghjklzxcvbnmq

wertyuiopasdfghjklzxcvbnmqwertyu

pasdfghjklzxcvbnmqwertyuiopasdfgh

klzxcvbnmqwertyuiopasdfghjklzxcvbmqwertyuiopasdfghjklzxcvbnmqwer

uiopasdfghjklzxcvbnmqwertyuiopasd

ghjklzxcvbnmqwertyuiopasdfghjklzxvbnmqwertyuiopasdfghjklzxcvbnmrt

uiopasdfghjklzxcvbnmqwertyuiopasd

ghjklzxcvbnmqwertyuiopasdfghjklzx

BBuussiinneessss

IInntteelllliiggeennccee

In Banking and Finance

Team- Predators

Puneet Gupta (09BM8037)Varun Bajpai (09BM8059)



2 | P a g e

Table of Contents

What is BI ................................................................................................................................................ 3

Why BI..................................................................................................................................................... 4

Without BI, Companies end up with........................................... .......................... ........................... ..... 6

BI for Banking Institutions ....................................................................................................................... 8

The challenge is to achieve .................................................................................................................. 8

Achieving Objectives........................................................................................................................... 9

Example ................................................................................................................................................ 11

KPIs for Banking Sector ............................ .......................... .......................... .......................... ................ 12

Income Perspective............................................................................................................................ 12

Investment return Perspective ............................................................................................................ 12

Cost Perspective ................................................................................................................................ 12

Interest Perspective............................................................................................................................ 12

Company assets Perspective .............................................................................................................. 12

Risk Perspective ................................................................................................................................ 12

Monthly Account Snapshot Fact ........................................................................................................ 12

Dealing with Multivalve Dimension .................................................................................................. 13

Some touch points ................................................................................................................................ 14

Insurance Sector ............................. .......................... ........................... .......................... ........................ 15

Core Processes .................................................................................................................................. 15

KPIs for Insurance Sector .............................. .......................... .......................... .......................... ........... 15

Policy Transaction Fact ..................................................................................................................... 15

Policy Premium Snapshot Fact........................................................................................................... 16

Claims Transaction Fact .................................................................................................................... 16

References ............................................................................................................................................ 18



3 | P a g e

What is BI• Intelligence is the ability to apprehend the interrelationships of presented facts in such a way as to

guide action towards a desired goal.

• Business Intelligence is the use of company data to facilitate decision-making by decision-

makers, which means understanding current functioning and anticipating actions for well-

informed steering of the enterprise.

• Basically we are talking about following transformation: Data Information

Business Intelligence is a broad field of study. The major focus of business intelligence theory looks at

specific factors in order to make high quality decisions. These factors may include partners, economic

environment, customers, competitors and internal operations. A lucid understanding of how these factors

help business get better:

Competitors: Constant look into the competitors who poach businesses customers. Today’s businesses

must regularly evaluate the strength of their competitors and choose different strategies that not only

control their competitors, but also grow own businesses market.

Customers: Survival of a business is dependent on customers. Business intelligence facilitates businesses

comprehend their looking at customers preferences, understanding them better, helping businesses align

to customers demand.

Business Partners: Business partners are necessary to business, it may be suppliers, customer support

companies, processing companies or delivery companies that help your business throughout its tenure,

and it is significant to ensure that all businesses partners associated with the business are in

synchronization with you.

Internal Operations: Internal operations are typically described as the everyday activities of a business

or organization. If you wish your business to be successful, you should be able to view your business’s

strengths and weaknesses on a regular basis.



4 | P a g e

Various mechanisms to analyze operational and historical data are possible with Business Intelligence.

This results in clear understanding and provides intelligence into customer behavior, sales patterns and

products, giving them the best deal while cutting cost on marketing campaigns.

Why BI

There are many drivers as to reason why Business Intelligence is required; these include; handling the

increasing amounts of data from an increasing number of sources, this may include latest technologies

such as RF-ID; the reducing time between creating data and the need to use the data, the ‘respond on

read’ issue; the expectation to be upto legislative requirements and finally the simple need when sharing

resources between partners to be able to get advantage of maximum opportunities, hence being able to

‘optimize’ decisions by using best available data in near real time. These all add up to a need to make BI

analytics a part of both present operational processes via integration with the core enterprise systems, as

well as a support for Real Time computing.

Some instances of key drivers are:



5 | P a g e

Corporate Accountability in different industry sectors such as Health, or SarbanesOxley (United States),

and similar elsewhere, was extending a wave of ‘compliance Business Intelligence’ solutions.

Customer Relationship Management updating to real time actionable customer data to initiate individual

dialogue hence optimizing each engagement individually to the customer as well as supplier.

Business Activity Monitoring, as enterprises rapidly become driven by short term reporting of operational

results, and need to be able to handle that is in more places in a more decisive manner.

Data and Storage Management, considering the cost as well as availability issue, through reworking datawarehouses, or data marts, into lower cost, higher impact, and data on demand capabilities.



6 | P a g e

Without BI companies are likely to:

o Exceed budgets

o Miss expectations

o Improper usage of funds among various departments

o Miss sales opportunity

o Ignore profitable markets

o Focus on less performing products and services

o Neglect measurable metrics

Companies often find themselves in precarious position due to many factors such as:

o Lacking insight to operational inefficiencies

o take longer to identify and address issues

o Lacking visibility across the enterprise

o difficult to coordinate activities across departments, divisions, partners, and customers

o Lacking depth of analysis

o miss seeing abnormal variances and understanding root causes that have material impact

on earnings

Without BI, Companies end up with

• Multiple versions of the truth

• Misaligned action across the organization

• Difficulty in prioritizing



7 | P a g e

• Inability to perform in-depth analysis

• Not knowing where to concentrate efforts

• Inability to measure departmental performance

• Unable to locate important information



8 | P a g e

BI for Banking InstitutionsThe challenge is to achieve

Meet the corporate needs for powerful analytical capability with ensuring the Delivery of best-of-breed

accounting and operations functionality. Providing users timely access and ease of use should be of

primary importance. Capability to cope with increasing and ever more complex regulatory requirements

such as Basel II and offering simple and seamless integration into existing environments is very

important. The major challenge is to assist with the organizational challenges of data collection and data

consistency and handle multiple and disparate data sources from legacy systems. Also manage large data

volumes (current and historical) with minimum total cost of IT operations.

So if we broadly list down the objectives:

• Increase Customer Base

• Increase Operational Efficiency

• Increase Customer Satisfaction

• Customer Behavior Analysis

• Adherence to guidelines

• Staff Performance Analysis

• Increase Profitability



9 | P a g e

Achieving Objectives

o Increase Customer Base

o Analysis by

Geographical Area

Industry

By Category

By Revenue

By Profitability

Demography

The increase of customer base with help of the analysis by Geographical Area, Industry or Demography is

a handy way of applying business intelligence for achieving business objectives. The industry can be

evaluated considering the segregation like Category, Revenue or profitability. All these factors contribute

to a development of core strength for a business. Business Intelligence comes real handy for this reason.

o Increase Operational Efficiency

The operational efficiency of any business defines its competitive advantage. An efficient company can

market its products at much better price than the inefficient competitors. The edge of having a operational

efficiency comes real handy for this reason. Business Intelligence has an important role to play in

improving this efficiency. It is about proper application of the technology and reaping off the wonderful

outcomes.

o

Productivity Analysiso No of transactions – Target Vs Actual

o Inter-departmental delay analysis

o Time Spent Vs Profitability Analysis



10 | P a g e

The productivity analysis of any business also describes its competitive advantage. A proper analysis

giving relevant results may be used to make very important decisions. The factors like number of tractions, comparing the actual with the target are very important. Other can be analysis of

interdepartmental delays or the time spent on an aspect and profitability analysis of the same. It is about

proper application of the technology and reaping off the wonderful outcomes.

o Increase Customer Satisfaction

Survival of a business is dependent on customers. Business intelligence facilitates businesses

comprehend their looking at customers preferences, understanding them better, helping businessesalign to customers demand. With proper analysis drastic improvements can be achieved.

o Suggest alternate investment plans based on past allocation and performance

o For Adherence to Guidelines

o Locating Deviations

o Tracking money trails

Study of past allocation and performance the future strategies can be formulated. Business partners are

necessary to business, it may be suppliers, customer support companies, processing companies or delivery

companies that help your business throughout its tenure, it is significant to ensure that all businesses

partners associated with the business are in synchronization with you. If you wish your business to be

successful, you should be able to view your business’s strengths and weaknesses on a regular basis.



11 | P a g e

Example• Loan Performance Analysis by

• geographical area

• demographic segments

• industry type, company turnover, profitability, age of company

• amount of loan, period of loan, interest rate

• occupation, duration of occupation, designation

• salary range

• educational qualifications, marital status

• loan product features

The analysis of a loan with help of the analysis by Geographical Area, Industry or Demography is a

handy way of applying business intelligence for achieving business objective in this case. The individual

or the organization can be evaluated considering the segregation like Category, Revenue or profitability.

All these factors contribute to a development of core strength of deciding the loan agreement and all.

Business Intelligence comes real handy for this reason. Factors like industry type, company turnover,

profitability, age of company, amount of loan, period of loan, interest rate, occupation, duration of

occupation, designation, salary range, educational, qualifications, marital status, loan product features can

be easily mapped and evaluated on the basis of historic performance. The comparison and study via

business intelligence tools will facilitate clear directions on the process and decisions involved.



12 | P a g e

KPIs for Banking SectorHere we will try to list down a few key performance indices that are relevant for the Banking Sector:

Income Perspectiveo Non-interest income level

o Fee income level

o Gross profit

o Interest spread

Investment return Perspectiveo Return on capital employed

o Return on operating capitalo Return on Equity

Cost Perspective

o Cost to assets ratio

o Overhead cost ratio

o Cost to Income

Interest Perspectiveo Profit margin

o Operating margin

o Interest margin

Company assets Perspectiveo Non-performing assetso Reserve requirement

o Return on average assets

Risk Perspectiveo Value at risk

o Capital adequacy ratio

Monthly Account Snapshot Fact

Based on the business requirements just listed, the grain and dimensionality of the initial model begin to

emerge. We start with a core fact table that records the primary balances of every account at the end of each

month. Clearly, the grain of the fact table is one row for each account at the end of each month.



13 | P a g e

After study of the bank’s requirements, ultimately the following dimensions are chosen for initial schema:

month end date, account, household, branch, product, and status. As illustrated in Figure below, at the

intersection of these six dimensions, we take a monthly snapshot and record the primary balance and any other

metrics that make sense across all products, such as interest paid, interest charged, and transaction count.

Remember that account balances are just like inventory balances in that they are not additive across any

measure of time. Instead, we must average the account balances by dividing the balance sum by the number of

months.

Dealing with Multivalve Dimension

As we just saw in the John and Mary Smith example, an account can have one, two, or more individual

account holders, or customers, associated with it. Obviously, we cannot merely include the customer as an

account attribute; doing so violates the granularity of the dimension table because more than one individual

can be associated with an account. Likewise, we cannot include customer as an additional dimension in the fact

table; doing so violates the granularity of the fact table (one row per account per month) again because more

than one individual can be associated with any given account. This is a classic example of a multivalued



14 | P a g e

dimension. For now, suffice it to say that to link an individual customer dimension to an account-grained fact

table requires the use of an account-to customer bridge table, as shown in Figure. At a minimum, the primary

key of the bridge table consists of the surrogate account and customer foreign keys. We’ll discuss date/time

stamping of bridge table rows in Chapter 13 to capture relationship changes. In addition, we’ll elaborate on the

use of a weighting factor in the bridge table to enable both correctly weighted reports and impact reports.

Some touch points

Identification and Retention of most valued accounts

Accounts can be differentiated based on primary balances and analyzed on that criteria

Understanding ever dynamic customer behavior based on different parameters

It may be relevant for the bank to capture and store behavior scores relating to the activity or

characteristics of each account and household

Snapshot of historical monthly data may be used for defining future products



15 | P a g e

Insurance SectorCore Processes

Issue/Renew Policies

Collect Premium Payments

Process Claims

KPIs for Insurance Sector

Policy Transaction Fact

Number of Policy Sale

Value of policies sold

Number of policies renewed compared to number of policies sold

Number of policies sold as compared to quota

The policyholder dimension qualifies as a large dimension with more than 1 million rows. The covered item

dimension likely also falls into this category because most policyholders insure more than one specific item. In

both cases, it is often important to track content values accurately for a subset of attributes. For example, we

need an accurate description of some policyholder and covered item attributes at the time the policy was

created, as well as at the time of any adjustment or claim. The use of minidimensions has an impact on the

efficiency of attribute browsing because users typically want to browse and constrain on these changeable

attributes, as well as on updating. If all possible combinations of the attribute values in the minidimension have

been created already, handling a minidimension change simply means placing a different key in the fact table

row from a certain point in time forward.



16 | P a g e

Policy Premium Snapshot Fact

Number of missed premiums or lapses compared to total number of policies sold

Percentage of policies that lapse within the first two years

Claims Transaction Fact

Total benefits paid as a percentage of premium

Frequency of claims

Time taken to process a claim



17 | P a g e



18 | P a g e

References1. http://www.hr.capgemini.com/m/hr/tl/Executive_Summary__Business_Intelligence_and_Service

_Architectures.pdf

2. HP Intel Solution Center Blueprint - Business Intelligence for Financial Institutions Loan

Performance Selects MicroStrategy for Improved Analysis and Reporting of the Mortgage

Industry Data Trends

3. http://www.microstrategy.com/news/pr_system/press_release.asp?ctry=167&id=1021

4. The data warehousing tool kit- The Complete Guide to Dimensional Modeling by Ralph Kimball

BI in Banking and Finance_Predators

Documents

Transcript of BI in Banking and Finance_Predators