Since 2020, the positions of predictive analytics in finance have become more sound. PwC calls this technology “the future of financial software,” meaning its ability to provide more accurate planning and cost-effectiveness. And that’s exactly what the world needs today.
Even though the financial sector is steadily reviving after the pandemic, 2020 has serious consequences today.
Among all, they determine the preferability of digital solutions along with double-checking of all the possible risks and unexpected spendings before investment.
Predictive analytics addresses all these threats. If you’re interested in this solution, here are the answers to the most common question about this technology.
Q1: What is Predictive Analytics in Finance and Accounting?
The most common application of predictive analytics in finance is detecting possible wrongdoings and neutralizing them before they bring significant harm to your business.
This risk management technology provides the tools for advanced monitoring and continuous improvement.
Q2: How Is Predictive Analytics Used in Finance?
Applications of predictive analytics in finance have a wide range — from routine activities we do every day to strategic corporate decision-making.
For example, it can assist in strengthening the security of using personal credit cards and prevent a fraud attack on an entire banking system.
Q3: Are There Any Predictive Analytics Examples?
Here are 3 high-potential financial spheres where the application of predictive analytics in financial services can bring a significant competitive advantage and greater business results.
Predictive Analytics in Corporate Finance
Companies can experience the full set of advantages provided by predictive analytics. As a CFO, you can use this technology in everyday work — from general strategic planning to concrete decision making.
Predictive analytics has answers to all the future-related questions including sales, needed spendings, and possible changes in customer behavior after the decision is made.
Predictive Analytics in Healthcare Finance
When it comes to healthcare, the greatest power of predictive analytics is providing better control over the finances in hospitals. The improvements include savings anticipation, debt collection, and better budget regulation.
For instance, one Alabama hospital used predictive analytics to launch a subsidization program to improve the cash flow, as IBM reports.
Predictive Analytics in Auto Finance
The automobile industry experiences the positive impact of predictive analytics in terms of forecasting, data mining, simulation, and optimization.
In particular, it enables smart loans and better control over pricing and personalization of the service. Here, analytics enables a better match between customer expectations and pricing scenarios.
Q4: Is There a Concrete Use Case for Predictive Analytics in Financial Services?
In practice, predictive analytics addresses numerous aspects of personal and corporate finances.
One of the most illustrative cases is working with false positives, or alarms that are determined as suspicious but really don’t bring any harm. They illustrate the problems with the classification and identification of harm in the financial system.
Detecting this problem manually when it arises takes a lot of time and is not effective. But with predictive analytics, you get access to regular testing and constant monitoring that eliminate the problem more effectively.
Deloitte offers this solution to global banks since 2013, providing continuous annual monitoring of transactions in real-time to fine-tune the existing detection scenarios and eliminate the appearance of false positives.
Q5: What Are the Benefits of Predictive Analytics in Banking?
Here are 5 top advantages of predictive analytics, relevant for all industries and business of any size:
- More accurate monitoring. The technology tracks the coherence between expectations and reality regularly and can warn you of possible gaps in advance.
- Risk mitigation and fraud management. With analytics, you can understand your business more accurately and detect the upcoming threats in advance.
- Better user experience. Predictive analytics determines the strengths of your business and lets you know what to invest in to maximize customer satisfaction.
- Product improvement. Analytics describes your product in detail, enabling you to detect and work on more accurate appearance, pricing, and distribution.
- Informed decision-making. With the broad picture, the management board can address the issues more accurately and match the product with its customers better.
Q6: Why Predictive Analytics is Important in Financial Services?
Of course, the great predictive potential of analytics brings significant advantages to the corporate structure. But its importance goes far beyond the limits of the banking sector and reaches a better quality of customer service.
Predictive analytics can track the specifics of customer behavior and provide all the information needed for launching a product-oriented approach in your business.
This is possible because the technology shares customer feedback and preferences across the organization, providing each employee with the relevant information for the needed insights and relevant product enhancements.
Q7: What Is the Future of Predictive Analytics in Financial Services?
As Deloitte’s report on the banking sector states, analytics steadily becomes “the major part of any business initiative,” meaning its ability to mitigate serious risks connected with accounting and workforce management. And so, the more companies apply this technology, the safer environment they create.
In contemporary volatile times, the ability of predictive analytics in financial services to guarantee stability and foreseeability is what most businesses are searching for.
In terms of customer service, the analytics will develop in 4 key areas:
- Customer acquisition. The tool can provide the needed data to track individual preferences to improve the selling tactics. It will be effective if mixed with marketing and analytical capabilities.
- Service. The analytics provides the answers to important questions of how to serve each particular customer well and which communication channels to pick.
- Relationship development. By giving customers what they need, the financial institution can increase the user experience from neutrally OK to outstanding WOW-effect.
- Retention. The technology enables proper classification for launching initiatives each customer group will like.
Q8: What Is Predictive Visual Analytics in Financial Services?
Visual analytics is the technology that not only classifies but also visualizes insights. This type of predictive analytics is especially helpful for tracking customer behavior and working with Big Data.
That’s because its greatest advantage is the proper classification of customer sub-segments, especially helpful for customer retention strategies.
Q9: How to Integrate Predictive Analytics in Financial Services in Your Business?
If you’re interested in adding predictive analytics to your business processes, request the service of financial software development from Intellectsoft! In this set of solutions, we’ll improve the customer experience and the overall corporate efficiency with custom software relevant to your company.
We at Intellectsoft offer a set of various FinTech solutions, compatible with healthcare, insurance, mobile banking, digital wallets, and many other industries and types of know-how.
Talk to our experts to find out more about the topic and learn how fintech solutions might help your business grow exponentially!