Mapping the Market to Create Healthy Banks

How we can use mapping the market to create healthy banks.[1]

In the midst of today’s financial turmoil, soundness of banking becomes an issue not just to people in the industry but to the public. As you probably noticed in our previous posts, Geographic Information Technology (GIS) can be applied to any business. Here I found a quite interesting case of a financial data provider that helps banks to come up with the best strategic decision using the information collected through GIS software.

SNL financial, based in Charlottesville, Virginia, provides its clients with up-to-date visual information that enables banks to do some scenario-based simulations by changing attributes that affect their strategic decisions in a speedy but easy and intuitive manner. “SNL collects, standardizes and disseminates specialized information for the banking, financial services, insurance, real estate, and energy industries through its web portal SNL Interactive or SNLi, which uses GIS software called ArcGIS to view and analyze information on a map."[2]

The following is a summary of the article, but for the full details of the story, please click here.

SNLi Mapping

With this GIS applied technology, clients can view various types of data, including street information and aerial images, and create new data, such as adding new market areas and incorporating demographic information and business data. For example, SNL’s clients can quickly visualize their branch locations against the locations of competitors to evaluate growth opportunity through M&As, pictured below.

Branch Analytics

Branch Analytics allows customers to quickly perform in-depth market studies, integrating bank branch deposit and demographic data. It is a powerful GIS analytics on web that helps banks to find the best solution to maintain a healthy balance sheet. With data on changes in market deposit concentration, service subscribers can easily model what-if scenarios such as what would happen if they opened new branches, offered different services, or closed underperforming sites. Branch Analytics also makes it easier for bankers to create a report and a map for presentations. And the maps update and reflect on changes in information.

Despite proclaimed accuracy of its data and success in the US, “public good” nature of their service may limit its wider use in the future. Individual financial institutions have a strong incentive to use the data SNL provides, but on the other hand, they are unwilling to share information that contribute to accuracy of SNL data but may be used against their own interests, which eventually leads to overall inaccuracy of the data. In a market where externality is strong, a public rather than private entity serves better, I think.

References

1. www.esri.com
2. Karen Richardson, “Mapping the market to create healthy banks”, esri.com , Summer 2011.

[1] Karen Richardson, “Mapping the market to create healthy banks”, esri.com , Summer 2011, p. 20
[2] Ibid, p. 20.