Indonesian FSIs Caught in Data Integration Maze
- By CDOTrends editors
- August 07, 2023
The advanced analytics revolution promises to usher in a new era of efficiency and customer engagement for the financial services sector. But a recent study commissioned by FICO and Forrester Consulting revealed that Indonesian Financial Services Institutions (FSIs) are stumbling on the starting blocks.
Faced with formidable integration and strategy development challenges, these institutions have yet to fully tap into the potential of data-driven decision-making.
The 'Current State of Advanced Analytics Adoption' study discovered that most Indonesian FSIs are either developing (84%) or exploring (79%) their advanced analytics strategies. However, execution is a stumbling block. More than half are rolling out data operations and integration without a comprehensive plan, reflecting the lack of confidence expressed by many in carrying out these crucial initiatives.
Interest in advanced analytics is nonetheless gaining momentum. About 67% of Indonesian FSIs plan to construct more data applications, while 59% are eager to leverage predictive analytics and machine learning. Additionally, 54% aim to consolidate customer data on specialized enterprise platforms in the next two years. A nearly equal percentage wants to establish an Insights Center of Excellence for business intelligence, advanced analytics, data science, and artificial intelligence.
"There is a fast-follower opportunity for lenders to emulate local and global best practices and achieve the results of the first-movers in the market," said Dattu Kompella, managing director in Asia for FICO. He explained that when implemented effectively, advanced analytics can lead to top-line growth while improving the bottom line due to insights-driven decision-making.
Although 74% of business decision-makers within the FSIs identified improving customer experience as a top priority, this focus isn't translating into operational objectives. Advanced analytics-driven initiatives for customer experience enhancement rank fifth on the list, trailing behind revenue growth, customer acquisition, and productivity gains.
On a more positive note, two Indonesian banks that have excelled in customer experience were identified by a 2022 Bain & Company survey. These institutions achieved significantly higher Net Promoter Scores (an indicator of customers' likelihood to recommend a store or brand) by focusing on customer satisfaction during crucial interactions. Kompella believes other Indonesian financial institutions could benefit from this focus, utilizing advanced analytics to deliver personalized experiences and thus bolster customer engagement and retention.
However, hurdles remain. Among the top challenges are technology integration, constraints of legacy technology, and the need for suitable AI/ML/advanced analytics models. Budgetary constraints are also an issue, with Indonesia’s FSIs allocating significantly less toward data analytics and procurement than their APAC counterparts.
Despite these obstacles, Kompella remains optimistic. He suggests a platform approach to overcome complexity and boost banks’ confidence in integrating and operationalizing data. “By embracing the fast-follower approach, organizations can leapfrog ahead in operationalizing advanced analytics by adopting proven industry-focused financial technologies and operational know-how from trusted partners,” he added.
Image credit: iStockphoto/francescoch