Monday, December 17, 2007

Financial services firms can get an edge with data mining

By Michael Urbonas

Banks, credit unions, brokerages and other financial services firms typically rely on core processing services delivered by outside service providers. Unfortunately, it's virtually impossible for managers and workers within these financial services firms to analyze banking operations using the numerous reports provided by their data processing firms. As a result, they often rely on expensive, complicated means to analyze bank data for making critical business decisions.

However, a technology known as report mining enables financial services firms to leverage these existing reports as a new, customizable source of enterprise business intelligence.

Financial services managers are generally pleased with the quality of transaction processing provided by these external service providers. Yet when the time comes to analyze historical activity to enable business operations or proactive decision making -- or simply to facilitate internal reporting -- these managers realize their front-line source of information is locked in the form of those "canned," read-only reports.

Organizations need the ability to freely manipulate the data buried within those reports, which are seemingly intended only for viewing or printing. Indeed, many workers still resort to printing and re-keying data from such reports into a spreadsheet to facilitate analysis and reporting -- a time-intensive, error-prone process.

Solutions designed to give workers the ability to develop customized reports and data leave much to be desired. For example, many core processing systems offer remote access to production databases with a report generator; however, such solutions are complicated to use. Alternatively, data processing firms will provide custom reports when requested, but they are rarely timely or reasonably priced.

Report mining technology enables the intelligent recognition and parsing of data buried within existing report output into a data table -- without extra programming. Data mined from reports can then be sorted, filtered, analyzed and exported to other applications, such as spreadsheets or databases. End users of any tech skill level can use report mining to transform existing reports into live, actionable data for new business intelligence insights without assistance from the IT department.

Report mining places a wide variety of business intelligence initiatives within easy reach for financial services firms. By transforming general ledgers, journals and other bread-and-butter accounting reports into customized data, banks reduce the time necessary to perform reconciliations and other chores from days to minutes.

Auditors and fraud examiners also find report mining to be an effective tool in their arsenal of scam detectors. For example, bank auditors use report mining to transform over time a series of account statement files into a mini-database to facilitate trending analyses that flag questionable levels of banking activity by customer.

Bank executives need to know the quality of their loan portfolios. Of course, data processing firms will provide reports on a bank's loan activities, but report mining can extract and summarize loan data from such reports to identify loans by risk level, improving portfolio management.

Report mining even allows for improved revenue opportunities for financial services firms. Banks that use an outside credit card transaction processing service use report mining to transform credit card activity reports into customized analyses of account-holder spending practices which, ultimately, helps create targeted, personalized banking product offers.

These and many other business initiatives can be successfully executed by leveraging the organization's existing library of reports, which are already bought, paid for, cleansed and relevant -- all without new complex database programming. Banks, brokerages and other financial services firms -- large and small -- would benefit from using report mining technology to transform existing reports into business intelligence gold.

Michael Urbonas is product marketing manager for Datawatch Corp. of Chelmsford, and president of the Boston Product Management Association. He may be reached at mike_urbonas@datawatch.com.