A new report, “Business Intelligence in Retail Banking”, predicts spend by retail banking institutions on business intelligence (BI) IT in North America, Europe, the Middle East and Asia-Pacific, will reach USD$9 billion by 2012, up from USD$5.6 billion in 2006. According to the report, the combination of compliance requirements, a competitive business environment, the sub-prime credit crunch and the need for stronger management will drive retail banks’ investment in BI software.

Given the sector’s growth of IT budgets devoted to BI, many vendors from diverse backgrounds, such as reporting, analytics, data management and operations, have rushed to claim their stake by adapting their definition of BI to fit their offering.
BI functionality is growing in demand as it tracks and monitors operational risk, and provides a more sophisticated and consolidated picture of risk exposure across all divisions. However, whilst many banks have already recognized the contribution that BI technologies can make in these areas, most of them are still far from achieving the maximum effect.

The need to support financial analysis, customer intelligence systems and more formalized performance and risk management, have all collectively become an important organizational imperative. Furthermore, financial services companies are also facing ever-increasing regulatory pressures, which make it all the more important for banks to have risk management, fraud prevention, and anti-money laundering systems in place.

BI technologies will therefore be important to future success. However, the market is still far from total saturation, as only around 50% of retail banking institutions had the customer intelligence functionality in place at the beginning of 2007. Datamonitor expects spending on BI technology within the customer intelligence solution area to top USD$1.8 billion by 2012.

Although traditionally utilized by just specialists, there is a growing trend towards pervasive use of BI technologies within solution areas such as risk management or customer intelligence. New approaches recognize the need to apply greater intelligence at both strategic and operational levels and make BI functionality available to a wider audience across channels such as branches or call centers and divisions like bank-assurance, private banking or retail brokerage. Banks will only effectively exploit their data assets, if they align intelligent technology with data management techniques.

Further Reading: Business Intelligence in Retail Banking