Cloud Analytics and Risk Decisioning are Not the Future

Author: Chris Kneen

They’re the now

Cloud Analytics: Risk, or Potential?

In the highly regulated, risk averse financial services industry, the Cloud triggers mixed feelings. It’s portrayed as a melting-pot of risk with new threats ready to jump out given even the slightest hint of an opportunity. But, it’s also promised as the gleaming pot of gold at the end of the rainbow, offering abundant cloud analytics opportunities to get more accurate risk predictions.

So, which story is true?

The Cloud Conundrum: Mitigating Risk and Finding Opportunity

The greatest trick the cloud ever pulled was convincing the world that it was a singular thing. The cloud was never one thing. It is a many-thing, an amorphous galaxy of hybrid private and public clouds. It’s ever-expanding and all-encompassing.

There’s no theoretical limit to its growth: The cloud is the dimensionless “construct” room from The Matrix, and with the rise in cloud-based everything comes the increase in the number of channels that present risk. One of the most overlooked aspects of the cloud reality, however, is the potential an organization can find within the risk. The ability to streamline data from multiple apps into one place, and, more importantly, to predict has uncovered serious business potential.

That’s why it’s entertaining to think of the expanding cloud ecosystem, and the risk that comes with it, like the “construct” room from The Matrix: All you should need to change rules, increase speed and predict opportunities is imagination.

Cloud Use in Financial Services

In a recent Accenture report on the state of cloud adoption in banks, only 3% of respondents worked for a bank that didn’t have a cloud strategy. But, only 26% were utilizing what could be considered more mature Cloud strategies that have core Cloud practices, critical tools, and continuous improvement measures in place.

But, the benefits for pushing a Cloud analytics strategy forward are only becoming clearer in today’s digital world. While big picture improvements such as improved efficiency and lower costs are often touted as key reasons to make the move, there are far more creative ways banks can benefit from a Cloud or even multi-Cloud environment. Opportunities to create solutions that could fundamentally alter the way banks address risks—and in turn personalization—to design products more suited to today’s digital-first consumer.

Cloud Risk Analysis

Let’s take a look at two areas where moving to the cloud offers huge opportunity for financial services organizations: risk mitigation and product personalization.

While the digitization of well, almost everything, has opened the door to a new set of risks, the ever-increasing amount of data being produced on a daily basis has also given financial institutions the opportunity to get a much deeper understanding of those risks.

The sheer volume and variety of available data creates a need for an architecture that supports powerful data orchestration and analysis tools. A Cloud analytics environment lends itself perfectly to this role, providing banks with the opportunity to rapidly process information and implement advanced analytics models that let them learn from and predict risk using available data.

For example, the most creative organizations are already deploying machine learning models within the Cloud to improve risk prediction accuracy. Whether it’s for loan origination, payment processing, merchant onboarding, or something else, machine learning is allowing banks to identify which data points are most valuable and reliable for accurately predicting future risks such as loan defaults and fraudulent activities.

Instead of trying to assess risk in a bubble, the Cloud moves banks out of the bubble and into an immense universe where they can truly understand the components that make up the risk environment and predict how people will move within that landscape.

Cloud Risk Analytics and the Power to Personalize

One of the most exciting opportunities for Cloud-based risk decisioning and analytics is the opportunity to create truly personalized products and pricing for customers.

Say that a bank offers non-secured loans, Cloud decisioning doesn’t just allow them to offer real-time approvals, it gives them the power to use their advanced analytics models to precisely predict risk based on billions of data points. They can instantly produce a credit score that allows personalized risk-based pricing.

So, instead of placing a potential customer in a pricing bracket and offering the price associated with that bracket, they’re able to offer a truly customized price based on the specific risk that customer poses. The bank understands the risk, the customer gets the best price, it’s a truly customer centric approach to loan origination.

But banks can go one step further. Cloud environments don’t just support risk data, they can also encompass CRM data. The data that shows the person behind the numbers, the lifestyle behind the risk score, the customer needs behind the data. It’s this information that empowers banks to see the big picture and identify products and services that would provide value to each and every customer on a case-by-case basis.

This is the opportunity for banks to build ongoing relationships with customers by providing a fully personalized and customer focused experience where they offer the right products at the right time. And, they personalize those products and associated pricing using machine learning to accurately predict risk.

Cloud Analytics is Here and it’s the Key to Future Success

Banks are under increasing pressure from both customers and competitors to create world-class, customer-centric digital experiences. To be successful this means truly embracing what technology has to offer, which means driving a full Cloud strategy into action. And while yes, the Cloud does potentially expose your business to new risks, it also offers the solution to mitigating those risks with deeper data insights.

Beyond these risks, there is one undeniable opportunity that banks cannot afford to pass up. The chance to use predictive analytics to develop customized pricing and personalized products. It’s the opportunity to put the customer first, and that’s the only path to success in an industry where competition isn’t just knocking at the door, it’s already sitting at your kitchen table.

 


Expanding Your Market: Using Data to Reduce Lending Risk and Increase Approval Rates

In this on-demand webinar award-winning lender Elevate Credit’s VP of Data Science discusses lending in the non-prime market, using technology to improve decisioning accuracy, and how data can expand your market.

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