OTC Markets Group recently announced the acquisition of QaravanSM Inc., a leading provider of innovative  software and risk & performance analytics tailored to the banking industry.

We sat down with Tony Hodson, now the Senior Vice President of Market Data at OTC Markets Group, to learn more about how bank data and analytics have evolved over time.

What gap in US bank data and analytics did you identify that led you to create Qaravan?

While bank regulators collect and publicly disseminate an incredibly rich set of data on the banking sector as part of their risk management processes, it is not easy to access or use if you’re not a regulator.  To get this data in a format that makes sense, some analysts rely on data aggregation firms – which can be costly for the 5,000+ community banks. They face the same market pressures as the big banks, but can’t necessarily afford the technology and analysis required to use this data effectively.

By 2014, we concluded that technology had come far enough along that these barriers should no longer exist.  And, although the underlying infrastructure costs had decreased dramatically, the legacy players continued to charge massive fees.

A second factor we considered grew out of being heavy users of this data ourselves. We knew firsthand that the market lacked a solution with a more modern, intuitive user interface. Internet and network speeds have improved dramatically, and people are used to user-friendly tools delivered through their web browsers. Today, we take for granted things like “smart” search, on demand reporting, and interactive data. We also noticed that legacy aggregators still focused on the back-end data rather than the consumption of it.

Why are more robust bank analytics products important for the community bank sector?

Qaravan allows banks to more efficiently sift through huge amounts of risk and performance data and develop reports and dashboards to benchmark themselves against a specific peer group and automate ongoing reporting requirements.

At the smaller end of the spectrum, we have the CEO of a $200 Million bank who used to spend considerable time each quarter digging through FDIC’s call reports for data on his bank and 10 respective  peers. Qaravan has helped to automate this reporting and embed custom peer group benchmarks that help them focus on what matters. And, improving this critical report provides significant value for a small bank.

The same concept applies to larger institutions where roles may be more granularly defined. For example, an Asset Liability Committee member can compare balance sheet composition or costs and yields of funds for a specific geography. A chief lending officer can better understand how their past due accounts compare to those of banks with a similar lending strategy. And for external analysts, Qaravan can be used to highlight “best of breed” banks or identify potential acquisition targets.

What advice do you have for bank executives as they look to develop peer groups to benchmark their performance?

In our work with the ABA over the last four years, we’ve seen an evolution of thinking as bankers start using Qaravan. They’ll usually begin with an initial interest in how they compare to banks of the same size and then move on to how they stack up against banks in their neighborhood (the local competition for deposits and assets).

But, the most engaged executives go beyond building a peer group that can be used to justify their performance. Instead, they shift their focus to looking for the operational characteristics of the highest performing banks (lending, funding, fee, and fiduciary strategy) and use these as a guide for strategic decision making. In essence, we’re not just trying to help banks answer for “how are we doing?” We’re making it possible for them to more easily dig deeper and ask, “compared to what?”

What recent features are you excited about?

We are most excited about the launch of Qaravan CECL software. It’s unique to the market and it is already impacting the way smaller institutions approach these emerging accounting standards.

Qaravan’s CECL solution works like tax prep software. Qaravan takes a complex topic (CECL), breaks it down into step-by step processes, manages data uploads and inputs, asks clarifying questions, and captures the bank’s supporting assumptions along the way. At the end of the workflow, the software produces an incredibly robust stakeholder report that documents the process, methodologies and outcomes of the analysis.  The report can then be easily shared with boards, regulators, and auditors.