Information Overload: Why Portfolio Managers Need Analytics

Trevor Mast
Senior Vice President Financial Services Products
Posted on July 9, 2015

Information overload

Information and how it is used are keys to any company’s success. A recent study from the University of Texas at Austin found that for the median Fortune 1000 company, a 10% increase in the usability of its data translated to an increase of $2.01 billion in annual revenues; while a 10% increase in remote accessibility of data translated to an increase of $65.67 million in net annual income.

The problem many financial institutions face is collecting the right data and managing it in the most efficient and effective way. With more than 2.5 quintillion bytes of data created every day, according to IBM, it’s easy to see why portfolio managers need tools to help them sort information and make strategic decisions.

The solution is analytics.

A growing number of financial institutions are turning to data and analytics to make key decisions. A survey conducted by the Economic Intelligence Unit and PricewaterhouseCoopers revealed that 64% of executives say that data has influenced their strategy decision and that they expect data to continue to have more of an effect on decision making in the future. Furthermore, 71% of banking and financial firms report that data and analytics create a competitive advantage for their organizations.

Why Implement Portfolio Analytics Software

Controlling costs and reducing risks are the hallmarks of credit card portfolio management. That’s why you need the right tools in place. Analytics, which combine traditional and digital marketing, risk mitigation, regulatory compliance and finance assessments, allow you to make the right decision for the right objective, using quality data and timely information.

Portfolio analytics allow financial institutions and their managers to measure financial metrics, price-to-earnings ratio and rapid assessment of risk to make precise, educated decisions that will grow accounts and maintain spend. When it comes to identifying marketing opportunities, collecting customer data also allows financial institutions to better understand who they are targeting and what changes need to be made to the current programs to get higher returns. For instance, portfolio managers may want to uncover spending behaviors among customers in different income brackets in order to create customized marketing programs or determine which credit card is suitable for the most relevant cardholder. Additionally, reviewing payment patterns can help in identifying whom to target with loyalty rewards so as to expand growth through incentive-to-buy strategies.

Sophisticated analytic solutions make this possible, turning a data deluge into precise, high-value information. The key is to focus on what is important to your line of business.  Essential data types include spending behavior (a key profile indicator for future spending habits as well as up-sale and cross-sell opportunities), customers’ economic demographics and risk factors that affect those customers. For instance, in order to mitigate risk, you can review over-limit patterns, changes in the level of payment balances and bad debt trends.

Benefit of Portfolio Analytics

In the ever-changing payments landscape, accurate, easy to access, on demand information is an absolute necessity. Whether identifying key performance indicators, mitigating high-risk activity or differentiating profitable customers, analytics is invaluable. Analytics is the intelligent solution needed to identify and address specific needs to increase revenue, maintain risk and advance customer relationships.

By having an analytically driven approach to their portfolio management, managers can ascertain if they were successful in targeting the right people in their marketing programs with relevant products, know when to adjust their accounts to an acceptable risk, how and when to increase an account holder’s spend and whom to target with compelling offers. Importantly, portfolio management software cuts down the time each manager would have to manually dig through such data, thus adding efficiency and helping managers to grow and maintain their accounts. This allows them to assess the performance of their portfolios more effectively and more frequently so decisions regarding risks and marketing opportunities can be being proactive rather than reactive.

Financial institutions and their managers may want to look for analytic solutions that offer features to drive better decisions with the precision that offers them the opportunity to grow. They also should look for reputable companies that have years of experience, which will allow them to scale their intelligence as they grow.

Some companies see data, others see information that drives effective solutions. What do you see?

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Trevor Mast
Senior Vice President Financial Services Products

Trevor’s expertise in product management, sales and client service; as well as team leadership; sets him apart from his peers and allows him to provide executive-level guidance to his teams and with his colleagues. At FIS, Trevor provides executive oversight of the credit, debit, ATM, software, and fraud prevention product portfolio.