A survey conducted by IBM indicates that banks need to innovate in their business model, mine customer information for deeper client insight and interconnect the numerous risk silos to better comprehend the range of risks and opportunities. Banks must act today to redefine their business models, restore client trust and understanding, and reform their risk management culture.

The five top challenges that we are hearing from our banking clients include: capital liquidity, reducing cost/complexity, mergers, acquisitions and divestitures, risk management/compliance and customers relationship. Managing future growth while, at the same time, strengthening the balance sheet is one of the most important immediate challenges for banks.

Thus, there are three imperatives that are going to force financial institutions to think and act in fundamentally new ways. The first one is re-thinking and innovating the business model. The second is developing new intelligence that enables financial institutions make informed, sound judgments and become much more client centric. The third and final one is the need to integrate various types of risk into an overall integrated risk management framework.

How can the banks intelligently manage the huge amount of information?

Consumers today want to bank anywhere, anytime with the convenience of using their smartphones and iPads at their fingertips. As we move towards a cashless society, the future of banking will be shaped by how the physical and virtual worlds of banking converge.

The conventional approach with analytics has been focused on collecting data, storing data in a database, and doing data mining.  While that's worked well in the past, this approach is becoming less and less effective as the volume of data explodes and the pace of change accelerates financial markets.  The real challenge and opportunity is about turning real-time information into insight on a real-time basis, bringing all the disparate information together to make smarter decisions whether it be for pricing or risk or for achieving greater transparency.

Today, banks need to evaluate the use of smarter banking solutions to manage connect across layers in a complex interconnected global financial services ecosystem and value the need to analyze rich and varied information sets in real-time.

Can you give us a small brief on your Smarter Banking initiative, and how it is useful for banks?

Banks must address the declining health of their client relationships. Our research indicates a clear trust gap between banks and their clients. Clients overwhelmingly believe banks operate primarily in their own interests rather than those of their clients – and, surprisingly enough, many bankers agree. To rebuild client relationships and re-establish trust, banks must understand what clients want, what they need and for what they are willing to pay. One way to do this is by employing a new approach to client segmentation – one based on what clients’ value rather than on traditional attributes like age, health, stage of life, etc. Such segmentation will lead to a healthier, more sustainable relationship with clients and, in turn, a more profitable one.

Smarter banking is all about the optimal use of analytics in banks to help develop new intelligence that enables banks to make informed judgments and be more client-centric and focused on the opportunities in advance. This will help them determine pricing, new products and services, the right customer approaches and marketing methods, which channels customers are most likely to use and how likely customers are to change providers or have more than one provider.

What is your firm's strategy to help banks?

IBM is helping banks reduce complexity, increase accessibility, strengthened data mining capability and cost savings. At this time, we are working with several banks around the world including India to embed smart analytics into their core data management strategies. Today, most of the banks on the Global Fortune 500 list are IBM clients.

As part of our business analytics and optimization service line, we have dedicated more than 8,000 business consultants worldwide, has 500 plus analytics patents and 200 IBM mathematicians that focus exclusively on analytics.  To add to the growing analytics portfolio, IBM also made a USD 1.7 billion acquisition of Netezza as well as, Unica, Coremetrics and Sterling Commerce. With these acquisitions we are gaining the ability to help businesses quickly gain intelligence into social networks and online media sources and incorporate this insight into their overall marketing campaigns.