Disadvantages of Salary Caps
In the previous couple of articles, we have tried to understand what salary caps are. We also know the different types of salary caps, where they are followed across the world, their objectives as well as their advantages. It needs to be understood that the salary cap system is not free from its flaws. In […]
Spreadsheet Modeling: Dividend Discount Model
In the past few articles, we have studied about the various models that are available to help us predict the value of a firm based on the dividends that it provides. However, all these models had one flaw. They expected that the dividends of the firm will follow some set pattern. For instance, the assumptions […]
Use Cases of Artificial Intelligence in Commercial Banking
In a previous couple of articles, we have already seen how artificial intelligence is useful in the field of commercial banking. We have also seen the various advantages and disadvantages of deploying artificial intelligence in commercial banking lending. However, it needs to be understood that lending is not the only department in commercial banking that […]
What is Litigation Funding?, Its Advantages and Disadvantages
Legal costs have long been a deterrent for people wanting to file lawsuits. In a country like America, the legal fees can be significant. A lot of good lawyers charge hourly fees. Many plaintiffs believe that in an hourly fee system, the lawyer is incentivized to drag the case for as long as possible. This […]
Debt Funding in Sports Franchises
Sporting franchises are also business organizations that operate just like other business entities. Therefore, just like other business entities sports franchises also require debt in order to fund their business. There have been various institutions such as banks and private equity firms that can provide these required loans to sporting franchises. Prima facie, it may […]
Commercial banking has traditionally been a relationship-driven business. This meant that the business was primarily driven by human-to-human contact. Over the years, banks have acquired the capability to store large quantities of data and then mine the data in order to discover meaningful trends.
There are many modern software tools that allow banks to use the large volumes of transactional data that they generate. These types of tools are generally classified under the heading of “data analytics”
Banks have started using data analytics to gain a sustainable competitive advantage over their competitors. In this article, we will explain the various ways in which commercial banks have started using data analytics in order to improve their operations.
Commercial banks have access to large volumes of transaction data on behalf of their clients. Data analytics can be used to process this data in order to find meaningful trends which can then become the starting point of research for the product development team. It needs to be understood that financial innovation is the need of the hour for commercial banks who are facing significant challenges from fintech companies who are innovators in this space.
Banks can also use the high volume of data generated in order to segment their customers into various groups. This segmentation helps the commercial banks to better predict the types of products and services which will be preferred by the corporate customers.
Instead of the decision being made by humans, it can be made in an automated fashion. This helps banks save costs as well as shorten the decision-making cycle. Ultimately, lower costs and faster service times can become a bank’s value proposition in front of prospective customers and can help the bank increase its revenue in the long run.
There are modern software tools available that can perform the same tasks which are performed by a relationship banker. However, these tasks are performed in an automated manner. Hence, the element of human intervention and the related risks are significantly reduced. Thus, data analytics have the potential to lead the banks toward the concept of mass customization wherein commercial banks can offer personalized offers to every corporation that they provide service.
For instance, the software may be able to help clients identify any fraudulent transactions by reading the patterns which generally lead to such transactions. Similarly, it may be able to help corporate clients identify any upcoming liquidity shocks as soon as possible. They may also be able to foresee future credit needs and may help the corporations make educated decisions based on the predictive capability of the software.
Predictive intelligence can help create a win-win situation for both parties. On the one hand, it can help clients get better advice whereas, on the other hand, it can help create cross-selling opportunities for the bank. Overall, it can help commercial banks truly engage in consultative selling.
The bottom line is that data is the new gold in today’s world and this principle holds true in the commercial banking industry as well. Commercial banks have the financial strength required to invest heavily in information technology which can help them gain a competitive advantage over their peers.
It is a well-known fact that data analytics is going to revolutionize the banking industry in the future. It is for this reason that banks have already started investing heavily in this technology.
Your email address will not be published. Required fields are marked *
