Banking business intelligence

Banking business intelligence

Banking business intelligence refers to all general functionalities business intelligence but is focused on the informational needs of banks and the finance community. With the increase of governmental regulations, information is the key component to compliance. Therefore, solutions are designed largely with a focus on the unique needs required by the financial industry, especially in relation to federally-mandated governance.

In the United States, the banking industry is unique among other industries due to the amount of governmental regulation and oversight, yet at the same time banks must compete in the free market to gain customers, engage in marketing tactics and make a profit for its stockholders. It is also unique that most currency transactions do not occur from one person handing someone else cash money. Most currency transactions occur via electronic information exchange only without cash actually exchanging hands.

What business intelligence is designed to do for banks is to allow the decision makers within the banking industry make the best decisions or take the best actions best upon the most accurate, complete and timely information.


Although there is no specific dates related to the introduction of the first business intelligence software geared only to the financial or banking industry, it appears that many software companies started introducing bank targeted products within the late 1990’s and early 2000’s. Until that time, many banks had to create their own bank end solutions, ETL (Extract, transform, load) Solutions and apply their unique business rules.

As business intelligence companies started noticing an need unmet by other software, many started producing solutions specifically targeted towards this industry.

Key Concepts

Information availability

It has been reported that “50% of Businesses File Bankruptcy Due To a Data Loss." cite web |url= |title= 50% of Businesses File Bankruptcy Due to a Data Loss |accessdate= |author= |authorlink= |year= |month= |format= pdf |work= |publisher= |pages= |quote= ] This is because the cost of even one hour of downtime has been calculated in some studies as up to one million dollars. With the large amount of transactions, information systems must be fully available and usable in order to limit severe consequences. The consequences of lost or missing data is severe.

This also means that Banking BI Solutions must include the back end capability and network availability to remain up and running, with failover capability and documented emergency procedures.

Transactions by account

According to Plunkett research cite web |url= |title= Deposits, Income & Expenses of FDIC-Insured Commercial Banks June, 2003-2007 |accessdate= May 22,2008 |author= |authorlink= |year= 2007 |month= November |format= |work= |publisher= Banking, Mortgages & Credit Industry |pages= |quote= ] , there are currently over 6 billion dollars of deposits occur annually within the United States. This amount is truly amazing. Sandeep Junnarkar cite web |url= |title= Newsmaker: Tracking money trails with technology |accessdate= |author= Sandeep Junnarkar |authorlink= |year= 2001 |month= November |format= |work= |publisher= |pages= |quote= ] reported that even medium sized banks have to deal with more than 90,000 daily wire transfers per day. Other transactions could deal with debits and credits towards corporate and personal accounts.

Business Intelligence must be able to capture the relevant information related to each transaction, but then roll up each transaction in multiple hierarchies in order to determine what that transaction means to the health of the bank, the interest of the stockholder and the needs of the government. In addition, some transactions at one branch may have to be merged with transactions at another branch in order to get a full and complete picture of an account or a loan or a Portfolio (finance). Accurately applying business rules to every single transactions can be quite complex.


As has been seen from the lending crises in early 2008, lending management practices within the bank can truly break the bank. These essentials of loan management can include the timing of loans and repayment schedules, portfolio diversification, duration of funding, the usage of credit rates and the time horizon for equity allocations cite web |url= |title= Pitfalls in the application of RAROC in loan management |accessdate= |author= Jean Dermine |authorlink= |year= 1998 |month= March |format= |work= |publisher= The Arbitrageur |pages= |quote= ]

Business Intelligence for banking is designed to keep executives and bank managers up to speed on the nature of the outstanding loans, current loans under review and delinquent accounts. These solutions must provide the right information to the right people so that the right actions can be taken.

Portfolio Management

With the Gramm-Leach-Bliley Act of 1999 ( [FDIC Important Banking Legislation] [] ), many banks have expanded their services to include insurance, investment services and portfolio management. This means that Business Intelligence must be able to handle the increasingly complex data requirements that are needed by the insurance and investment industries.


Mergers continue to reduce the number of banks - from 9,000 in 2004 to 8,600 in 2007 . What this does is to increase the complexity involved in the banking hierarchy. Some banks may own other banks and other banks may simply be holding companies. Within Business Intelligence, the software must be able to handle these types of complex hierarchies – not just parent/child but also peer to peer relationships between sister branches.

Governmental regulations

When it comes to governmental regulation and the banking industry, the foundation of all compliance activities relates to information. Information must be protected from some groups or individuals, while being fully available to other groups or individuals.

Some of the governmental regulations pertaining to banks include:

Gramm-Leach-Bliley Act of 1999

International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001

Sarbanes-Oxley Act of 2002

Fair and Accurate Credit Transactions Act of 2003
The Bank Secrecy Act

US Patriot Act

Basel II

Right to Financial Privacy Act

Business Intelligence Solutions are designed to help assist in the accurate and complete information exchange required to ensure compliance to all governmental regulations. In addition, the software solution must be flexible enough in order to adapt to new regulations and changes to existing laws.

Cash and Investment Management

Banks manage their cash levels and investment policies in order to remain liquid, become competitive and have enough money on hand to meet current and future needs. In addition, a poorly managed cash management policy could actually re-identify a bank as an investment company, which brings with it a completely new set of regulations that must be met.

Software created for the banking industry must be able to handle reconciliations and settlements so that the management at the bank knows where their cash is today, where it’s going to be tomorrow, how much is supposed to be coming in and how much will be going out.

FDIC and Peer Data

The most successful BI Solutions will also incorporate FDIC and peer data so that each bank can benchmark themselves against other banks or financial institutions. The FDIC will provide information relating to regional and national banking trends, industry impacting events, and alerts.


Growth of BI in banking

According to Lee Conrad “Business intelligence will become more important for community banks over the next few years, as bigger banks continue their push into the traditional realm of community banks, competing with them head-to-head.” [Conrad, Lee. July 2007. “Community Banks Reporting Greater Pressure to Use BI” U.S. Banker. Vol. 117 Issue 7, p34-34, 1p]

This means that software providers will continue to enhance their current BI solutions as well as providing new solutions to meet newer needs.

Immediate Event Streams

Like the larger BI world, immediate event streams are the up and coming trend. These immediate event streams can include text messages, e-mails and other electronic alerts. The focus in banking business intelligence stems from data aggregated from multiple sources, predictive analytics, and peer or industry data [Rogalski, Shari. December 2007. “Deliver BI 2.0”. DM Review. Vol. 17 Issue 12, p36-37, 2p]

Risk Management

DataMonitor mentions that in banking business intelligence and largely due to the lending crises occurring in 2008, risk management is another huge trend [DataMonitor, April 2008, “Retail Banks' spend on BI technology to reach $9 billion by 2012.”. MarketWatch: Financial Services. Vol. 7 Issue 3, p10-11, 2p]

Some of this pressure will come from a need to please shareholders and more pressure may be granted by the US Federal Government. In fact, the report delivered by DataMonitor states:

“Spend by retail banks in this area [sic] is expected to reach $1.76 billion by 2012. Risk assessment necessitates the integration of data stored in a variety of disparate data warehouses, as well as legacy applications, across various lines of business. As a result, a data integration, metadata management, and data store infrastructure will be vital to create this comprehensive view”


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