Banking and Big Data Analytics

Unit 1 IP

Banking and Big Data Analytics

Andre’ Forbes

Colorado Technical University

Dr. Stephen McCauley

Banking and Big Data Analytics

Fraud

There are multiple reasons to continue investing in the Big Data analytics. Most banking

institutions are really going after Big Data analytics. The banking organizations are taking the

advantage when it comes to Big Data in a numerous amount of ways. The bar continues to be

raised for cybersecurity all the way to loyalty cultivation and for the offerings through innovation

that come with personalization. That will create an experience that is individualized inside of

modern banking. Data can drive a banking institution many ways.

A large amount of the banking institutions focusses on the imitativeness coupled with

qualitative analytics. With this the risks are removed, and it arranges the forecast for the

customer using intelligence. A development has been made using Big Data. for example,

integrated the Big Data platforms, by using conformance policies. Another example, managing

the mandates along with governance.

Experimenting with IoT can be established when using with activities for mobile banking.

Certain applications can create to exploit Big Data in which sends it on the path to optimization

management the banking portfolio functions while commercial sales are going on.

Another reason to keep investing into the Big Data process or programs is with its banks can

detect many fraudulent behaviors by a monitoring system that is tracking the transactions. It does

not matter is the software is homegrown, expensive, or manual intervention. At the point of sale

(POS) in real time the traditional systems can still have effectiveness while processing. When

detecting fraud with Big Data there should be a great design of huge enterprise fraud system that

will manage customers correlations. By doing this the range is detailed across contact channels

and across channel fraud is identified. There can be use case processes to help manage fraud too.
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Big Data Analytics works best to have fraud protection when the transaction is taking place. Of

course, that makes another for investing in the Big Data Analytics program in the banking

institute.

Metadata helps to drive Big Data in many ways. Every single record that becomes produced

is exhausted while being linked to a base in combination with attributes and data. Next the

statistical techniques help the common entities show identification that are collapsed. This help

with the production of single views of other entities within networks. These networks are very

discrete and bounded inside of data in which is generated while representing statistics that are

categorized into relationship groups and activities. Recently banking fraud systems are designed

to go beyond a customer’s typical view that helps give a holistic approach when it comes to

fraud behavior. In addition to channels and unrelated perpetrators. This helps to understand the

most behavior of consumers.

Each banking transactions or center transaction that happens online passes through sets of

predictive, rules policies and models. The system check of transactions is done in real time

against the enterprises intelligence that it has about each consumer and the consumers behavior

that seems devious. An example would be when a customer makes a withdraw that is unusually

large from its average withdraw transaction. With Big Data processes implemented the system

can produce a certain score that will predict that this transaction is accurately fraudulent. This

also will go across broad range of channels. Another advantage is the system is not dragged

down while the process is making this decision also in real time over records in the millions.

Nightly batch processes are running on every customer bank account that does an investigation

and looks to detect any fraud that’s been happening an any new fraud.
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When banks operate over millions of records. There is a batch process ran each night on all

customer accounts that exist that will investigate and detect fraud as it stands and all new fraud.

The scoring related networks and including behavioral data that is transactions network growth

rates activity levels. Other data that is provided for example previous addresses contact numbers

current address employers. Also, there can be an approach that is hybrid that combines the basic

business rules with more advanced analytics and social network. This assessment combination

technique will enable a robust detection of fraud complex and unknown or even if the fraud

patterns are not known at that time. In addition, there will be negative impacts for example like

fraudulent transactions along with fines product losses, financial, and loss of reputation.

Marketing

CVA the acronym for Customer Value Analytics and I using Big Data this gives leading

marketers chance to deliver consistent customer channel or experiences for the customer across

all. Of the many areas of Big Data analytics, they help revolutionize the marketing in the sales. If

we look at the overview of all the delivering data results today there are many examples. For one

example prices for consumers can be defined managed and propagated through channel selling

networks that are optimized in the area where you would see rapid gains. When obtaining prices

for optimization for particular product or maybe service it’s now beginning to be more possible

to do that thanks to all the advances and processes for Big Data Analytic algorithms and in

advance analytic techniques. There became a way to streamline the routine price and decisions

by the driven commodity and industries where these products are stationed today.
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Big Data’s and its Many Contributions to Marketing and Sales

Louis Columbus, analytics tech says that all this increasing quality of the lead sales data, all

the improvements of prospects list that is accurate, the planning of territory, rates that win and

engagement strategies that are big decision-makers are continued areas where Big Data Analytics

is giving a contribution to today’s sales (Columbus 2016).

Big Data has an influence on marketing it provides insights where the content is more effective

at every stage of a sales process like. Also, it helps with investment when it comes to Customer

Relation Management in most cases the acronym is used (CRM). These systems also can have

improvement as an addition to major strategies that help increase a conversion rate, revenue,

customer value for a lifetime, and prospect engagement. Cloud-based enterprises that are

software organizations allow Big Data to provide its insights in order to able a lower Customer

Acquisition Costs which is also called (CAC). Also is management on a broad amount of

customer driven metrics that are very sensitive to keeping a cloud base business running.

Here are some examples of how Big Data revolutionizes marketing and the sales:

1. Big Data helps differentiating the price strategies at the level where the product is with

the customer and it also helps optimize prices helps to be more with achievement.

2. After researching I found that there is 75% of a typical organization’s revenue comes

from just basic product and 30% of the decisions that are made when it comes to pricing for an

organizations as they make on a yearly basis fall short to deliver the best price that should be

used.
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3. Big Data has a 1% increase in price translating to 8.7% increase in the profits of

operating if there is no loss in volume, this gives pricing very good edge for potential improving

profitability line.

4. Differentiating pricing strategies at the customer-product level and optimizing pricing

using Big Data are becoming more achievable.

Big Data revolutionize all organizations will attain a broader customer responsiveness in gain

their customers insights better. There was a study done that show marketers utilize Big Data and

all the analytics to help improve the response time. Organizations are using analytics along with

data mining to help also gain a broader insight that will also help them with their relationship

strategies (Columbus 2016).

The most popular use cases with Big Data and sales and marketing are customer analytics,

fraud and compliance, new product, operational analytics, service innovation, organization data

warehouse optimization. Customer analytics have a domination with Big Data in marketing and

sales. The, strategies that help support this reducing customer churn, improving existing

products, increasing customer acquisition and improvement on existing inventory.

Another reason to stay invested in Big Data and its analytics it helps increase a marketer’s

ability to get way past a campaign execution and to focus on making the customer or consumer

relationship more successful. The analytics of Big Data help to define customer development and

a guide it to help the marketers increase the loyalty to a customer and improving the relationship

while lifetime.

Chief marketing officers use search engine optimization, email, marketing and mobile devices

to retrieve Big Data and it is having a huge impact all marketing programs as of today. Big Data
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in the future will be one of the essential things to organizations marketing strategies for the long-

term.

Credit risk management

In addition, Big Data gives large enterprises actionable intelligence and insights of the big

drivers of their organization. The three core areas the Big Data helps deliver value to a business

is generating revenue, reducing working capital, and reducing costs. In organizations value

drivers move more efficiently and they are managed by the use of Big Data and advanced

analytics.

For example, credit risk management has to be proactive and is increasing the adaptation of

big banks and large financial institutions. These Big Data techniques along with analytics play a

big role in strengthening the proactive risk management. For example, in areas of card fraud

detection, credit scoring, financial crime compliance, cyber analytics, and stress testing. Data

analytics help the big banks analyze all major factors that cause most borrowers to default on

house loans and also help them design new programs to help borrowers from defaulting on loans.

There are data management challenges along with using Big Data and management with

analytics. Analytics and Big Data management have become a vital tool in risk management and

big banking industry. There are many different data types available for managing the near

volume of the data becomes the biggest challenge for banks and their sector. With the challenge

does is make it apparent when combing through the data that is not useful or the data that is

useful.

Financial institutions today filter through a lot more data to help them identify fraud. While

analyzing the traditional customer data becomes not enough because most customer interactions
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will now happen through the Internet, social media, and mobile apps. What financial institutions

do to gain a more competitive edge, take the Big Data and leverage it to make it easier to comply

with rules and regulations, determine customer behavior, prevent fraud, develop data-driven

products, and increase sales. Mobile banking helps generate a large amount of data when it

pertains to the customers financial processes or transactions. The bank sector makes use of the

clients mobile banking statements help verify the customers financial position in order to provide

them with bank loans.

In the banking sector Big Data Analytics can do early detection of a high-risk consumers

account and this helps, and risk management and it reduces defaults on loans and cases of fraud.

Most banks in the United States have reduced their calculation of long default loans time out of

the mortgage book from over 80 hours to four hours.

Investment banks and financial institutions generate large amounts credit card data and also

transactional data about its customers. The banks breakdown the market of consumers into small

segments that help generate reports in number of seconds by using Big Data Analytic

technologies. Some of the latest technology that is behind Big Data is the Hadoop technology.

The Hadoop technology has an ecosystem that is design to help with statistical analytics, and the

queries, of large semi data that is structured. It has the flexibility and ability that will handle

large amounts of complex data in addition it helps unlock new opportunities for business insights

and for extracting value of large amounts of the organizations internal data.

The Deutsche Bank has found Big Data to be useful when performing or making significant

investments throughout all channels of the bank. This bank uses multiple platforms that are

Hadoops and are open source which allows it to be price low to be used for data processing.
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Some banks use a SAS application to analyze the quality of data. Sometimes the processing

can be complex therefore it takes longer.

These are Recommendations

Banks around the globe have to make sure they are compliant with all international standards

for banking that way they can manage each risk effectively. There are increasing emphasis on the

risk management and for customer service management. Big Data Analytics is coming more and

more important for both customer satisfaction and risk compliance. The developing countries are

challenged on how to know what the useful data is after sorting. Companies using international

data analytics and their platform will help resolve this problem challenge.

There is a huge opportunity to stand out from the competition by financial institutions doing

some type of mining of the Big Data analytics. By using machine learning and data science to

help analyze the data and gather the data it will allow financial institution to reinvent their

organization.

The trend for moving over to Big Data is growing rapidly. In the banking sector the data that

is now generated will grow every second. GDC prognosis Says it will each second by 700% in

2020. Financial institutions data, banking data, will cornerstone the flood of Big Data. Banks that

can process the data makes them competitive towards other financial institutions and other

banks.

The Big Data along with the applications and tools the data will flow with the input of

three major categories while relating to banks. One is variety in which is the plenitude of types of

data processed. Most banks deal with broad numbers of data types. They range from history to
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credit scores, risk assessment reports and transactions details. The banks carry loads of data like

that.

Velocity deals with the speed of the new data that is added to a database. The next category

is the volume in which is the space that the data will to store the information. New York’s Stock

Exchange (NYSE) generates data that is in the terabytes and this is on a daily basis. It is

important to mention the next major category value. Velocity, Variety, and volume are useless

their path does not connect to value. Value means that the banks can apply any of the results that

come from Big Data analysis in real time and decisions are then made accordingly.

These things can be applied to these activities:

• Finding out most spending patterns of their customers

• Identify the direct channel transactions of credit/ debit card payments and ATM

withdrawal

• Segregate the customers into different segments by their profiles

• Cross selling of products that is based on segmentation of customer

• Prevention and Fraud management

• Reporting, compliance, and risk assessment

• Application and customer feedback

Following the customers spending habits becomes very important. Banks have a direct

availability to wealth and that history of data in regard to their customers spending trends. The

know their income by the month. Banks know what was deposited into their savings account.

They even know what is paid in utilities. This creates a basis analyzing in the future. The banks
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use filters and macroeconomics for the staff to understand the growth of the customer salary and

if the spending stays adequate. This becomes the cornerstone factors for, mortgage evaluation,

insurance, loan screening, risk assessment, and cross selling.

Another important aspect how the banks will benefit from Big Data is by understanding if

customers withdraw their whole paycheck on payday. Or even they choose to keep in their debit

card. This information can be used to later approach the customers with offers (if they have no

more money in the bank in the bank after payday) with an offer to invest in a loan on a short-

term basis along with high rates when they payout.

Conclusion

Again, I want to say Big Data is personalized for targeting customers, personalized marketing

by what they spend. Analyzing a customer’s behavior through social media can also help banks

to find out of a customer is a credit risk and they can do customized offering to the customer.

Big Data can bring tremendous value to banks in the direction of effective fraud management,

credit management, integrated risks, and operational risk assessments. The systems that

implement Big Data will be able to detect all types of fraud signals and can analyze the

transaction in real time by using machine learning pattern that can predict illegitimate customers

or transactions that raise a red flag.

The banking industry will have better knowledge of needs by investing in the more innovative

knowledge of Big Data and have better knowledge of its customer’s needs. By doing these banks

will continue to give improved services in a well thought out manner with operational costs that

are optimized. Big Data is just evolving in the banking sector, but the sooner the banks adopt the

practices of Big Data the faster they can unlock many benefits that this technology can bring to
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their organization. Banks and financial institutions must grasp and evolve to the mew

technologies if that want to be successful. When Big Data is adopted and incorporated into the

bank sector that exist to today will be the key element of prevailing and surviving fast evolving

environment of business in the new digital millennium.

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References

Columbus, L., (2016) Ten Ways Big Data Is Revolutionizing Marketing and Sales Retrieved
from https://www.forbes.com/sites/louiscolumbus/2016/05/09/ten-ways-big-data-is-
revolutionizing-marketing-and-sales/#20fb433f21cf
Dragosavac, G., (n.d.) Big Data Analytics Retrieved form http://www.bigdatanalysis.com/fraud-
detection-banking-part1/
Fedak, V. (2018) Big Data analytics in the banking sector Retrieved from
https://medium.com/datadriveninvestor/big-data-analytics-in-the-banking-sector-
b7cb98d27ed2
Shukla, J., (2018) Big data analytics and risk management in banks Retrieved from
Some, K. (2019) Big Data in Banking, all that You Should Know Retrieved from
https://www.analyticsinsight.net/big-data-in-banking-all-that-you-should-know/
Fedak, V. (2018) Big Data analytics in the banking sector Retrieved from
https://medium.com/datadriveninvestor/big-data-analytics-in-the-banking-sector-
b7cb98d27ed2