A start-up called Whitelight Systems Inc. has unveiled software that can help financial institutions better understand credit risk, customer profitability, and returns on capital.
The software, called Whitelight, is part of a wave of offerings for banks classified as OLAP technology. OLAP, or on-line analytical processing, typically is part of decision-support functions involving data warehouses.
"As banks collect more and more information, if they want to utilize that asset effectively, they need tools that permit end-user manipulation," said George T. Kivil, an analyst at the Tower Group, a Newton, Mass., research company. "Tools like Whitelight provide a mechanism for providing large amounts of analysis without knowing up-front what the data cuts will be."
Such analysis is becoming more important for banks as they strive to understand which customers, product lines, and delivery channels-and in what combination-are most profitable.
"Banks began to build data warehouses in the late 1980s before anyone knew what they were going to do with them," said Jay Wheeler, director of the financial services group at Palo Alto, Calif.-based Whitelight. OLAP technology is designed to help banks make use of their data warehouses at a relatively low cost, he said. The two major types of on-line analytical processing are multidimensional, or MOLAP, and relational, or ROLAP.
With MOLAP, financial institutions create individual storehouses for analyses that revolve around specific variables. This could let a credit card manager, for instance, measure response rates to a marketing campaign by city or by certain demographics of the respondents, such as age or income.
With ROLAP, information does not need to be pulled into one of these storehouses. Instead data remain inside the main relational data base, and analytical tools draw their necessary information from there. Though ROLAP offers greater analytical flexibility, getting reports quickly can be a problem. Whitelight software tries to deliver the benefits of both MOLAP and ROLAP by creating a calculation server that sits between the data base server and analytical software on managers' desktop systems. William Bradway, research director and senior analyst at Meridien Research Inc., Needham, Mass., said it was too early to tell whether Whitelight will "make it easier for a bank to leverage the value of its data mart and convert it into business decisions faster."
However, he said, the software "allows financial institutions to better display the results of risk management or profitability analysis."
Data base manufacturers already use OLAP, and "slowly but surely the application vendors are going to have to incorporate this technology" as well, said Michon Schenck, worldwide director for financial services at Sybase Inc., a data base software vendor in Emeryville, Calif.
Several of the nation's largest banking companies have deployed OLAP technology. Chase Manhattan Corp. uses software from Information Advantage, Eden Prairie, Minn., to help focus its credit card customer acquisition efforts. BankAmerica Corp. uses Oracle Corp.'s Express OLAP product line to consolidate its financial analysis and reporting. BankAmerica also is testing Whitelight.