An indispensable business solution in the hands of modern finance arena.In the recent times,the financial outlook around the world has undergone tremendous changes.Spececially,the banking industry and the retail industries all over the world has shown brave and optimist approach in the way the business is conducted.Nowadays,the leading banks are using new and innovative tools to conduct and process the whole business.Amongst them,Data Mining is worth of mentioning.Data Mining (DM) tools are used for profitability,credit scoring and approval,to predict payment default,marketing,todetect fraud and customer satisfaction.This article briefs about Data Mining and overall concept.
According to Cabena et al“Data Mining is defined as the process of extracting previously unknown, valid,and actionable information to make crucial business decisions”.Data Mining is the process of collecting and extracting previous unknown information,in the form of segmentations, patterns and d associations from important and abundant data of an organization.Thus in normal words we can express Data Mining as a pattern of inventing,revealing and discovering the facts which were never known to us in order to predict the future occurrences, situations and possibilities to optimize business decisions, improve communication and value each customer to enhance customer satisfaction.it is one of the most important assets of any organization and each has known how to reveal the hidden valuable treasure in the form of data.
Data Mining, nowadays, is often considered as “analytical intelligence".It is now being used by several industries including banking and finance, retail, telecommunications, insurance and in other forms of finance industries.Data s are costly assets of any firm and to safeguard those, interest is created in data mining,including reduction of cost of data storage,economic edge to collect data,development of strength, computer aided system to process the data and of course to do all these functioning in a very economic way.Data Mining can help organizations better understand their business, confirm and enhance full customer’satisfaction and increase the effectiveness and consistency of the firm in the long run. It helps the entrepreneurs to minimize the production cost, labor cost, identify and model the best possible marketing and promotional strategies, fraud detection, analytical sources of failure,risk management and supply and demand forecasting.
Importance of DATA MINING in the Banking and Retail Industries:1) BANKING INDUSTRY:Nowadays,the leading banks are using new and innovative tools to conduct and process the whole business.New methods of banking are in place now and with current implementation, increased acceptance and the concept of Electronic banking has changed the whole concept of banking which was traditional previously.It is impossible for humans to analyze and un reveal the huge amount of data and effectively transform into useful form for the firm.Data mininghelps the banks: -
a)To analyze segmentation and patterns of the data which were previously unknown.
b)To predict the customers’ reaction regarding changes in interest rates.
c)The inclination of customers’ towards new products and offers.
d)It also helps in segmentation, visualization, predictive modeling, link analysis, deviation detection, clustering, and briefing.
e)To identify their most lucrative customers and their credit behavior..
f)Another use of data mining is to detect frauds and report these fraudulent actions to the management to take proper measures.
g)It also helps the banks to market it products by referring to its available data.
h)Cross Selling is another marketing area where this effective tool can be used effectively. For example: HSBC bank use data mining to find customers with demand deposits account who may be interested in a home equity loan.
i)Risk management is another popular area where data mining is used extensively. Risk management is a type of management where bank employees come to know whether the customers, with whom they are dealing, are reliable or not. To Data mining plays an important role here.
2)RETAIL INDUSTRY:Just like banking industry,retail industry is hardly ignoring and realizing the importance of Data mining in its day to day service. Nowadays, data mining is becoming an indispensable in modern industries including retail. Data mining helps the retail industries in the following ways :
a)It is used to provide information regarding sales in respect to the demand.
b)The customers choices and preferences on a particular product and inclination towards newly launched products.
c)The degree of competition with other products and industries.
d)It also helps to detect the seasonal variation of products.
e)Collect and discover previously unrevealed data for making proactive decisions.
f)Unlike banking industry, data mining also helps to market it products by referring to its available data.
g)In Risk management, retail firms use data mining to realize and understand the product behavior towards the market, omit the unrequired part, and reveal those consumers with low purchasing loyalty. It also helps them to reduce risks by helping them with the customers’ behavior.
h)Another use of data mining is to detect frauds and report these fraudulent actions to the management to take proper measures.
Thus,we can conclude the fact that data mining is an indispensable tool in the hands of banking and retail industry. With the tremendous growth in population and high levels of competition, data mining is used to better understand the public choices. All-important information, which was previously in thoughts, now are practically employed and ensured. Nothing can escape out of data mining. These above mentioned industries have realized the importance and utility of data mining and we all hope and believe that this particular tool will build a competitive edge ad withstand competition in future.