Data Complexity Challenges in Financial Services

Unrelenting pressure from non-traditional players is driving financial services organizations to digitally transform themselves. To become data-driven enterprises, banks and insurance companies need to address three key data management trends: data volume, ubiquity, and user demands. To reduce complexity, companies need to combine their existing and new data into a single data universe. Universal data helps firms enhance visibility, delivering insights that can improve efficiency, automation, and growth. By converting data into insights, organizations can become intelligent enterprises.

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Net Profitability Analysis and Benefits for Financial Services Companies

Most companies lack visibility into the net profit contribution of their individual customers and products. Without a strong understanding of how and why every customer and product contributes to the overall profitability of the organization, decisions are made based on personal bias, miss-aligned incentives, and “gut feel”.   While often (though not always) these decisions are made with the best intentions – they are rarely fully informed.

The result is a business environment where just as many customers lose money as make money. The top 20% of your clients are likely generating over 180% of your total net profits, while the lowest performing 20% of clients are unprofitable – losing 80%. That’s not even mentioning the majority of clients that simply break even. All of this creates a large opportunity to improve profitability by shifting the curve.

In order to shift the curve and improve net margin, insurance brokers need to understand not only the net profit contribution of each client and product, but the underlying causes – and couple that knowledge with an organizational plan that centers both tactical and strategic decision-making around the impact on net profitability.

Net Profitability Enables a Range of Profit Improvement Initiatives

Any net profitability solution is only as valuable as the actions taken once the new information is available. No matter how accurate or insightful the new profitability information is, a sound action plan and commitment to execution are critical to achieving value and improving profitability.

Fortunately, the value of these types of net profitability solutions is not just theoretical.  Financial services organizations have, for a number of years now, embraced net profitability analysis to better understand their business, create organizational change, and drive incredible net profit growth through a range of initiatives and best practices.

While each of these initiatives can provide value to any organization, every company varies in their appetite for change. Therefore the overall approach to capturing value will be unique to every company.  There are, however, a few best practices that are universal

1. 1. Strong executive leadership & commitment
2. 2. Organizational buy-in (developed through business engagement and training)
3. 3. Incremental approach to enacting change and capturing value (see below for example)

Success breeds confidence and buy-in, which in turn brings greater success.  It’s important to gauge the organizational readiness for change and implement accordingly.  The most important aspect is a readiness and willingness to execute on this powerful information.

To read a case study on customer return to profitability, Click Here!

To read a case study on client level actions, Click Here!

To find out how ImpactECS can help your company gain visibility and become more profitable, Click Here!