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Analytics & Reporting BPS in Financial Services: Leveraging Complexity for Competitive Advantage

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NelsonHall has just published a market assessment on Analytics and Reporting (A&R) BPS in banking and capital markets (BFS). This is an emerging BPS market with few significant competitors, and adoption from only a few institutions who are tier 1 banks in mature markets. There are many vendors of point A&R solutions, but no standard or dominant vendor has emerged to manage the process value chain for A&R within banks and capital markets firms.

The primary process that A&R clients and vendors have focused on over the past five years has been compliance, which has been a rapidly evolving and chaotic segment of the market due to continuous change in regulations and their continuous and ongoing reinterpretation. Successful compliance BPS vendors for BFS have been able to:

  • Adapt continuously to changing regulatory requirements
  • Meet deadlines for delivery of compliance and risk management model implementation and validation
  • Interact with regulators to explain compliance activities analysis
  • Monitor and advise on the selection of emerging technologies
  • Support client efforts to standardize risk management and reporting across multiple geographies. 

The key inhibiter to success for clients and vendors is access to relevant talent. As analytics has increased in importance to financial institutions, and other enterprises as well, the demand for analytics talent (primarily the combination of statistical experience and domain expertise) has outstripped the ability of enterprises to develop that talent. BPS vendors, due to their continuous need to hire technically skilled employees, have been well positioned to develop talent using partnerships with educational institutions to enhance promising workers with in-school and in-vendor development programs.

Today an emerging phenomenon driving A&R BPS adoption is where vendors are adapting analytics capabilities developed for other industries and deploying them in financial services. The most active domain for cross-industry adaptation is in customer behavior analytics adapted from deployments in the consumer packaged goods and retail industries. This trend has been driven by the need to increase revenues by shifting from product to customer focus, by customer value maximization (mature markets), and by customer acquisition (emerging markets). This trend represents a material change in A&R BPS from:

  • Descriptive analytics to predictive analytics
  • Cost containment to revenue generation
  • Post-action project analysis to pre-action project construction.

The operational risk of such a radical change in activities would typically preclude adoption in the financial services industry. However, the techniques of customer analysis, channel management, and marketing/sales program development have already been developed and tested in the consumer industries. Mature analytics and reporting techniques can be applied to BFS by the same BPS vendors who have worked with CPG and retail firms to support banks’ efforts to pursue a more robust omni-channel strategy. Successful BPS vendors must also couple ITS capabilities, since omni-channel analytics is very highly automated in its data collection, and most financial institutions do not have the legacy channel systems and tools to support highly interactive sales and marketing campaigns on-line (i.e. web, mobile, social media, etc.).

A&R BPS is currently a small part of financial institutions’ BPS engagements, but it is a critical leverage point for these institutions in managing their relations with regulators and customers. As such, it is rapidly becoming a key competitive differentiator for these institutions as they adapt their business models to the new banking environment. 

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