Building Business Intelligence Within a Community Bank

Defining the Role

The concept of business intelligence traces its roots back to 1865 and banking.

The earliest known use of the term “Business Intelligence” is in Richard Millar Devens’ the ‘Cyclopædia of Commercial and Business Anecdotes’ from 1865. Devens used the term to describe how the banker, Sir Henry Furnese, gained profit by receiving and acting upon information about his environment, prior to his competitors.

Business intelligence, or BI, is an umbrella term that refers to a variety of software applications used to analyze an organization’s raw data. BI as a discipline is made up of several related activities, including data mining, online analytical processing, querying and reporting.

In contrasting business intelligence and business analytics, business intelligence refers to collecting business data to find information primarily through asking questions, reporting, and online analytical processes. Business analytics, on the other hand, uses statistical and quantitative tools for explanatory and predictive modeling.

Key Elements for Success

There are many factors that determine the level of a bank’s success with its business intelligence platform, both at its inception and through its evolution as the organization and the sophistication of the platform grow. If your bank is considering the development of a dedicated business intelligence group, consider the following key elements when evaluating your potential for sustainable success.

  1. The level of commitment and sponsorship of the project from senior management.
    1. The team needs to sit as high in the organization as possible.
    2. Commit training and hiring to growing the collective analytic experience of the bank.
    3. Develop a consultative approach to servicing internal customers.
  2. The amount and quality of business data available.
    1. Consolidate the bank’s data warehouses.
    2. Consistently evaluate the data being input and maintained in the core system databases and centralized warehouses.
  3. Developing a process capable of progressing from identification through implementation
    1. Identification of Business Need
    2. Data Specifications
    3. Reporting Requirements
    4. Process Development
    5. Implementation

Getting Started

Almost all banks have components of business intelligence already in place. Marketing, Business Development, Finance and Accounting, Credit, and Risk are all major users of data. The evolution to a centralized business intelligence group will require varying levels of commitment and produce varying levels of results, depending upon several factors.

To determine if a change is in order, begin with this short series of questions.

  1. Evaluate the Bank’s Needs
    1. Is the bank good at asking strategic questions but lacking in implementation?
    2. Does the bank limit the amount of organizational change even though it has a proven track record of implementing new systems and changes in policies and procedures?
    3. Sustainability
      1. Does the bank have just a few projects in mind?
      2. Does it have the internal dialogue to sustain a pipeline of ideas?
    4. Resources
      1. Does the bank have the staffing or is it willing to hire the personnel necessary to staff the area?
      2. Is the Bank willing to pay to outsource some of the functionality, if necessary?
  2. Evaluate the Bank’s Commitment
    1. Regardless of how you currently identify yourself as an organization, is it possible to incorporate a greater level of statistical information and data analytics into the strategic evaluation and decision process?
    2. Will the Board be apprised of the ongoing activities of the group?
    3. Will the business intelligence function occupy a senior level position?
    4. How will the conclusions drawn by the business intelligence group be incorporated into actionable items and implemented?
  3. Data Warehousing
    1. Can the bank successfully establish a minimum number of data warehouses while providing end users with the raw data, analytics and reports they desire?
    2. Can Business Intelligence partner effectively with the other areas of the bank to ensure the data input into the core system databases is complete and accurate?

Summary

Banks using information to gain a competitive advantage has been around for hundreds of years. References to the term “Business Intelligence” as it relates to banking can be found back at least one hundred fifty years.

What has evolved for community banks is the opportunity to incorporate the use of both business intelligence and business analytics deeper into its strategic, analytical and implementation processes and to do it in real time.

What hasn’t changed is the need for organizational commitment, the correct allocation of resources, and the ability to implement.

Close Menu