What is the Future of Predictive Analytics in Finance
What is predictive analytics?
Predictive analytics is the study of past, present data with the help of different technical tools for better planning and decision making. It is generally used to identify future opportunities and risks by studying past trends and existing data sets. It is done using machine learning, data mining, statistical modeling, and other data technologies to predict the most accurate results. Hire the service of financial software development for better results.
Who all can use predictive analytics?
Predictive analytics can be used by every small as well as giant enterprise. Industries like tourism, entertainment, technology, marketing, finance, healthcare, pharmaceutical are making the best use of it to cater best services to the ultimate customers.
Companies are blind and deaf without data as data is the new gold. Let’s delve into some prime questions on what predictive analytics has stored for the financial future.
1. What do you mean by Predictive Analytics In Finance And Accounting?
- The common purpose of predictive analytics in finance and accounting is predicting possible wrongdoings and rectifying them before it turns into a grave mistake. With continuous effort, one can prevent the company from potentially huge losses.
2. How is it used in the finance department?
- The scope of predictive analytics is very huge in the financial department as it can help to improve services right from routine work to make strategic decisions at the top-level management.
3. What are some examples of predictive analytics examples?
- Predictive analytics plays a significant role in managing the finance department and the following are the glance of different industries:
● Corporate finance
- Big corporates are making use of predictive analytics to handle their finance. CFOs are using it in everyday work from general planning to big decision making. With it, they can study the effects of certain policy implementation in sales, expenditure, customer behaviors, and a lot more.
● Auto Finance
- The auto sector is harnessing the power of predictive analytics to serve customers in the best possible way along with total control over the finance. It helps in forecasting loan losses, loan exposure, residual value, and cost of funds. Along with that, it helps in data mining, predicts portfolio risk, credit risk, capital management, liquidity risk, forecasting roll rates, price optimization, lease offers & buy stocks.
● Healthcare Finance
- There are huge developments in the healthcare sector because of the increased usage of predictive analytics. It is used in vast aspects of the healthcare sector including in identifying patients, improving risk management, creating a credit score, and effectively handles financial aspects. Talking about financial effectiveness boosts saving anticipation, better budget regulations, and debt collection.
4. What are the advantages of predictive analytics in banking?
- Customers are expecting more and more from the banking sector, they want their complaints to be solved at the earliest, experience to be optimized, and hence services to be more flawless. Here is a glance how predictive analytics helping to improve customer’s experience in banking:
● Credit score
- It helps customers by predicting their creditworthiness. It generally studies their payment history, length of credit, new credit, type of credit, and amounts owed to draw the score.
● Prevention of frauds
- Identity theft is constantly increasing. In this, thieves steal the information and use the same data for digital fraud. But thanks to predictive analytics utilization in the banking sector helps banking professionals to put the pause on the increasing frauds. In case somebody else uses a particular customer card or some suspicious activities happen in an account, then notify users or the bank directly and give the chance to prevent fraud. By analyzing data patterns, it can help in reducing countless financial frauds.
● Plan budget
- Do you think managing finance is difficult? But not any more as computer models can do it for you. It identifies when any expense and income hit the account and helps to manage things much in advance. For example, if your mortgage payment is due on the 25th of every month, so your bank will send you an alert about the same.
● Intelligent financial management
- It not only manages financial transactions fully but helps users to understand if making extra payments on the loan would make any sense or not. Helps to send on what are the different approaches you should take to gain financial independence or it can help to save money through non-conventional investment ways.
5. What is the future scope of predictive analytics in financial services?
- A report by Deloitte on the banking sector indicates that advanced analytics will soon become part of mainstream functions. It can reduce the risks connected with finance and create a safer environment.
- Personalization: Based on the user’s data and history, banking institutions offer services as per the user’s need. For example, track user’s demographics, history of income and spending, financial products recommendations, etc.
- Quick tech support: It is expected that the banking sector can make use of advanced virtual assistants using natural processing language to give immediate answers to a user's query.
6. What is the difference between predictive analytics and prescriptive analytics?
- First of all, they are not synonyms to each but two different aspects of advanced technologies. Predictive analytics predict future action or result while prescriptive analytics will tell how to react in the given predictive analytics situation. Prescriptive analytics helps to make a better course of action based on certain projections and weighted projections.
By answering some important questions about predictive analytics, we hope that you got all your answers. If you wish to stay ahead of your competitors and to offer better services to your clients, it's time to implement predictive analytics in your business. Hire the services of experienced custom software development company Ahmedabad for your customized solution.