London – New research from data leader Qlik® reveals how concerns around trust and regulatory compliance, as well as weaknesses in the data pipeline, are slowing the adoption of predictive analytics in Financial Services (FS), preventing UK organizations from reaping the full value from their data and maximizing the potential with business intelligence platforms.
The report, “Unleashing the Potential of Predictive Analytics in Financial Services”, which surveyed more than 500 UK IT leaders in FS, exposes the slow uptake of predictive analytics. More than a third (38%) of British financial institutions have five or fewer predictive analytics use cases currently in operation – in stark contrast with the leading 7% of institutions, which have each introduced 50 or more.
Key issues IT leaders in FS face when implementing predictive analytics include:
- A question of trust – Every decision a financial services organization makes can have a major impact on a customer’s life, from agreeing to an overdraft to making payday or approving a mortgage application. Yet one-third (30%) of IT leaders admit fearing algorithms could unfairly impact their customers. This is perhaps unsurprising given only half of respondents (50%) trust decisions made by predictive analytics solutions are without bias and are always accurate (45%). Over two-fifths (43%) of respondents go far enough to say they wouldn’t even trust predictive analytics to manage their kids’ pocket money.
- Regulatory risk – In such a highly regulated industry, 44% of IT leaders fear they could be held personally responsible for decisions automatically triggered by predictive analytics solutions – rising to 81% amongst those working in funds and investments. The regulatory burden also weighs heavily on them, with 46% reporting it outweighs the benefit the solution could offer.
- Flaws in the data pipeline – IT leaders also cite a number of technical barriers to implementation. Two-fifths face issues with data quality (40%), data silos (40%) and the speed of data integration (36%). Data privacy (30%) and the use of inaccurate or outdated data sets (30%) were also common concerns. Just over two-fifths (43%) also fear they don’t have the skills to implement predictive analytics.
Improve trust by marrying human & machine intelligence
Many of the concerns relating to predictive analytics are underpinned by a lack of human oversight of its decisions – both in terms of outcomes and explainability. To overcome these issues, more than two-thirds (69%) of IT leaders in FS advocate incorporating predictive analytics into business intelligence (BI) platforms.
Most believe integrating the powerful forecasting of predictive analytics into the BI platforms that already inform employee decision-making has the potential to:
- help organizations comply with regulatory frameworks (72%)
- significantly improve employee decision-making (70%)
- deliver a better customer experience (68%)
- identify areas of cost saving (68%)
- democratize forecasting (67%)
However, ensuring employees have the requisite data literacy to understand, question and apply the predictive forecasts to their decision-making process is key to maintaining trust and compliance. Three-quarters (76%) of IT leaders in FS highlighted the importance of data literacy training in enabling employees to recognize the limitations of the technology. And in helping them explain to customers and other stakeholders how decisions using predictive analytics are made (77%).
“We are very clear about what our customers, our members, mean to us, and that extends to how transparent we are in decision-making processes. We would never want to make a customer feel like decisions were being made about them that couldn’t be explained. A human has to be able to explain those decisions,” said Richard Speigal, BI Centre of Excellence Leader at Nationwide. “Integrating predictive analytics into BI empowers our organization to harness its benefits for improved employee decision-making, while retaining upmost trust that it will only result in fair outcomes for our customers and stakeholders.”
“The financial services industry is undergoing rapid data transformation. Predictive analytics will play a key role in empowering employees to take more informed actions, with forecasts helping them consider what might happen, as well as what has happened before, when making decisions,” said Adam Mayer, Senior Manager at Qlik.
“However, our research has shown that many IT leaders are yet to fully trust the insights from predictive analytics and the impact these decisions could have on their customers,” continued Mayer. “This trust needs to be built from the ground up. Real-time, hyper-contextual information, with clear data lineage and robust governance, must feed the analytics data pipeline, revealing insights that data-literate employees can discerningly use to inform decisions. This will empower financial services organizations to look forward and take action, rather than react to business moments as they arise. Helping them truly achieve Active Intelligence from their data.”
Find out more in the full report here: Unleashing the Potential of Predictive Analytics in Financial Services
About the research
Censuswide surveyed 503 UK IT Leaders (CIOs, IT directors, etc.) between June 22nd and July 1st 2021. This included 200 respondents in banking and 201 in insurance. All respondents worked in organizations with a minimum company size of 50 and with a minimum average annual turnover of £1 Million.
Qlik's vision is a data-literate world, where everyone can use data and analytics to improve decision-making and solve their most challenging problems. A private SaaS company, Qlik provides an end-to-end, real-time data integration and analytics cloud platform to close the gaps between data, insights and action. By transforming data into Active Intelligence, businesses can drive better decisions, improve revenue and profitability, and optimize customer relationships. Qlik does business in more than 100 countries and serves over 38,000 active customers around the world.