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Heartland Bank

By Microsoft Customer Stories on February 8, 2017

Filed under Financial Services - Banking & Capital Markets

How does a bank that has been serving the heart of New Zealand for more than a century adapt to change without losing sight of its past? Heartland Bank, which has served businesses, households, and the rural sector since 1875, was growing rapidly after a 2011 merger. To maintain its growth path while staying true to its customer-focused roots, the bank took the bold step of replacing its existing SAS system with a Microsoft platform based on R Server and SQL Server 2016. Now, Heartland Bank can provide its customers with innovative, best-in-market products easier and faster for customers across New Zealand.

Facing competitive challenges

Heartland bank’s strategies have proven successful, but to stay competitive with larger banks as well as services like PayPal, it needed to adopt a more data-driven approach. “We focus on the product niches that we do well. Each one has very specific analytics requirements for analyzing risk, evaluating credit lines, and understanding cash flows,” says Chris Murray, Head of Enterprise Data at Heartland Bank. “They’re all quite challenging in that we need to act proactively and give the bank plenty of warning if things are changing.”

However, changing financial models was a labor-intensive and time-consuming endeavor based on SAS software. In addition, the costly analytics tools were licensed on a per-user basis, which limited access to a small group of IT staff. Heartland Bank needed a more flexible, scalable environment that could evolve with the company. For example, it wanted to provide better support for its “Open for Business” platform that customers used to apply for small business loans online. Mr. Murray says, “The volume of business loans is increasing, and if we want to stay competitive by quickly assessing and approving those loans, we need to make sure our analytics are on target and timely.”

The bank also wanted an analytics platform that could support future innovation, and streamlining lending was just the first step on a roadmap that includes capabilities like predictive analytics. Murray concludes, “We’ve got to start thinking a bit smarter about how and when we communicate with people and get to the point where we’re suggesting things before they even realize they need it.”

Taking an innovative approach to analytics

For Heartland Bank, moving beyond conventional banking processes meant stepping beyond conventional banking technology. Instead of upgrading the costly SAS software that many banks rely on, Heartland Bank decided to switch to a Microsoft platform based on R Server and SQL Server. R Server, which uses a powerful, open source statistical programming language, would enable Heartland Bank to take advantage of a broad range of analytics including big data statistics, predictive modeling, and machine learning. The bank could also tap into the global community of more than 2 million R users and developers for additional support.

“When we looked at our requirements, our internal skill sets, and our relationship with Microsoft, the decision to migrate to R Server was an easy one to make,” explains Mr. Murray. “R Server provides us with access to all of the community models and allows us to control all of our development and change management using Microsoft Visual Studio and Team Foundation Server.”

The bank has moved its credit scorecard development, arrears analysis, investment forecasting, and analysis of intermediary and broker performance to the R Server platform. It’s also considering moving credit scoring to the platform. The first phase of the project significantly streamlines the loan application and approval processes. “At the moment, our big focus is on making the onboarding process for loans as smooth as possible,” says Mr. Murray. “So we’re minimizing the amount of paper you need and maximizing the amount of analyzing we can do in the background with R Server. This includes pulling in data from third-party sources to build a picture of who you are, and ultimately help you complete your online applications faster.”

Heartland Bank has also kicked off a detailed analysis of the historic performance of its motor finance scorecard and looks forward to refining more financial models. Other initiatives include extending the new data warehouse to more of the bank’s operations. “In the last couple of months, we’ve tripled our requirements for speed and storage, and that’s going to continue for the next few months,” says Mr. Murray. “To handle it, we’re scaling up vertically and horizontally with SQL Server 2016.”

Accelerating innovation

The bank expects to spur future innovation with R server, thanks to the elasticity of its Microsoft technology and licensing agreement. “Our licensing enables us to pull mathematicians into a developer world,” says Mr. Murray. “We’re running R Services in Visual Studio and Team Foundation Server, which gives us the opportunity to put software developers and statisticians together. And that works. It’s a familiar toolset and a familiar environment—it’s statistics. So it brings those worlds closer together for creating more-targeted solutions.”

Exciting opportunities are on the horizon, including using the Cortana Intelligence Suite for facial recognition. By using cognitive services to compare the image on photo IDs with loan applicants, the bank can add another level of security. At the same time, the bank can use optical character recognition to capture personal information on the ID, then automatically cross-reference the information with credit history and other data to populate applications.

Spurring data-driven decisions

Using R Server has already sparked a new attitude about data. Now, business users across the bank are working with the new data models, instead of relying on IT to produce reports. And rather than waiting for overnight batch processing, employees have access to real-time information. Mr. Murray points out that simplifying access to information has resulted in more complex questions and more sophisticated analytics. “We are using R Server to build a data-first culture at the bank by ensuring that executives have the numbers to back up their instincts,” he says. “Before, a request would be like ‘Please get me the email addresses for people over 25 who live in the bottom half of the country.’ Now, we’re getting questions such as ‘Can you tell me what would happen to our deposit rates if we increased our six-month deposit rate by 20 basis points over the next three months?’”

With R Server, Heartland Bank has the analytics platform it needs to support business growth and innovation. “I’m excited about the merger of Microsoft’s delivery capability with the open source community,” says Mr. Murray. “Having access to open source R models on enterprise-grade infrastructure is great for us. It means that we can really leverage the specific smarts of the whole community and use them on a familiar platform with real confidence.”

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