Case Study: BankFinancial Corp.

Gets a Lesson Predictive Analytics

Summary
In the recent years the predictive analytics technology has become more and more
popular and has been tried to implemented by many businesses. One of such company is the
BankFinancial Corp. in Chicago. The company begun developing models to accurately target
promotions to customers and predict the future behaviour of their customers. To gain an
understanding of relationships and predicted outcomes, the bank selected a software that
utilized neural networks and regression routines to create the models. It is anticipated by the
bank that the software will reduce the time taken to develop the models by 50 to 75 percent. To
achieve this the neural nets require a large amount of data from the bank, which unfortunately
faces the challenges of working with data originating from varying systems in different forms. In
addition the bank will need to perform system integration and interface work for the system
work. One of the major challenges with employing predictive analytics is the lack of organization
which includes collaborating with experts in business, analytics and IT. For BankFinancial Corp.
to achieve a predictive analytics technology, the current analytics systems require a sizeable,
consistently formatted, integrated data warehouse plus a staff of professionals who understand
its potential.
 
How can predictive analytics increase BankFinancial Corp’s competitive advantage?
The predictive analytics draws new insight from existing information, allowing its users to predict
the behaviour of its customers and optimize customer relationship management. With the
predictive analytics BankFinancial will be able to predict which customers are likely to bring
them in the most income and target those customers with special offers and services. They will
also know which customers will stop using their services and also target them to keep their
services or analyze why. Another advantage of predictive analytics is that by applying tools like
behavioural analysis, predictable program eligibility and detection methods, BankFinancial
will be able to detect fraud before it affects their operations, save thousands of dollars and
improve their cyber security. The predictive analytics will also help BankFinancial Corp to
cut down costs by forecasting their inventory, managing resources and services. It will help
BankFinancial to improve their decision making and predict how certain products and
services will perform. 

What types of data do you think must be analyzed to determine what customers are most
likely to leave the bank during the coming month?
Data concerning the history of the customers will help predict if he or she is likely to leave the
bank during the coming months. If the customers has started to use the bank less and less
compared to how they much they used to in the past months or if the usual amount they used
put into the bank like salary, has lessened it is likely that they are already using another bank.
The transaction record of customers can also help know whether they are leaving the bank or
not. When the transaction that a customer makes daily such as electricity bills, phone bills,
water bills, lessen or if they no longer make those transactions using BankFinancial, it is an
indicator that they are using a different bank. When the customers refuses or cancels services
that they’ve used for a long time, this can also help the bank determine if he or she is going to
leave the bank.

How might predictive analytics be used by an organization such as the IRS?

Organizations such as the IRS can use predictive analytics to detect fraud in credit cards by
analyzing the previous patterns of usage to detect any unusual activities that might lead to credit
card frauds. The predictive analytics can also be used to track tax cheats by using the neural
networks and by analyzing various variables such as self employment status, number of times
they moved, declaration of business losses for multiple years in a row, allegations to illicit
sources of revenue and such.

Consider a future world where computer processing power is seemingly limitless and
business analytic software is used effectively by all businesses to predict customer
behaviour. What will marketing look like in this future world? How will one business get a
“leg up” on another?
In a world where computer processing power is limitless and business analytic software if
effectively by all businesses to predict customer behaviour, businesses will have to work and
invest on their reputation and image to get a “leg up” on another. In this world predictive
analytics is no longer a competitive advantage so companies will have to a high reputation and
present a “good company” image. To do so, CSR activities that present the company’s positive
contribution to the community and environment, constituency relations and excellent working
ethics will become the deciding factor for customers when choosing one business over another.