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Business Intelligence refers to the various technologies and tools that organizations use to collect, analyze and interpret data. The output of business intelligence gives organizations a better understanding of their current situation and helps them make better decisions in the future.
Banks and financial institutions have huge data from their businesses and customers that have accumulated over the years in their storage.
To transform these data into assets, their intrinsic value must be extracted through analysis, and identification of patterns. Here, the role of BI is vital.
Business intelligence is an important component in implementing IT-based strategies in banks. BI helps banks to improve their products on their path to excellence, strengthen their relationships with their customers, based on past trends, better predictions; handle competitive conditions in the market; manage risk; Increase operational efficiency and …
The functions of business intelligence in banks
Analyzing Historical Trends
Banks need to analyze past data to design their future activities. BI analysis mainly require information about branches, employees, deposits, concessional loans, sales and expenses, profits and losses, etc., in absolute numbers or percentages, which may be divided by product, section, customer profile, region, time, or Distribution structure.
Business intelligence analyzes these data in terms of indexes such as product profitability, improve to Understand customer needs, identifies key areas and new market opportunities, and clarifies what products need to be re-priced, what products should be eliminated, and what other products Should be introduced. With the help of these analyzes, banks can control the deviation of achievements from goals and take steps to resolve this problem.
Financial and non-financial risk and uncertainty is an integral part of banking. Risks mainly faced by banks include credit risk, market risk, and operational risk.
Credit risk refers to the possibility of non-repayment of the borrower’s obligations. Business intelligence can help banks to reduce the risk by creating databases from borrowers and business risk areas. Analysis that are carried out on previous transactions of a borrower can help to predict statistical behavior in the future. This information helps banks to correct their lending and risk assessment mechanisms.
Market risk is a risk that arises from fluctuations in market variables in markets where banks are more exposed. An analysis on historical data can strengthen a bank’s portfolio by highlighting diversification opportunities.
Operational risk is a risk that results from human error, fraud or natural disaster. Although natural disasters cannot be predicted, the risks of human error or fraud can certainly be checked through proper audits and stronger internal controls. BI helps banks to keep a comprehensive record of all financial and non-financial transactions of employees and other stakeholders in order to make the slightest deviation from the prescribed processes. An appropriate reporting mechanism also guarantees transparency in bank transactions and reduces operational risk.