Data is ruling the world. Well relatively speaking of course . And that isn’t an overly dramatic statement – it’s a simple matter of fact. Google processes more than 40,000 search queries per second, Facebook users send about 31 million messages and watch 2.8 million videos a minute, and the New York Stock Exchange alone writes more than one terabyte of information per day. David Richards, CEO, President, and co-founder of WANdisco, a software company that specialises in the area of distributed computing, highlighted that “We create more data every 20 minutes than is currently held by the Library of Congress”, whilst according to the International Data Corporation (IDC), by 2020 the digital universe – the data we create and copy annually – will reach 44 zettabytes, or 44 trillion gigabytes.
Furthermore, they estimate that worldwide revenues for Big Data and business analytics will surpass $260 billion in 2022, compared to $130.1 billion in 2016. In some ways it's perhaps not a surprise. Over the past years, many different industries have been adopting the use of Big Data: healthcare, marketing, technology and financial services, to name just a few. But the banking industry in particular has been notably present in the adoption of Big Data, and is set to be one of the top five biggest drivers of this continued growth.
Discussing the use of data within financial services, FinTech specialist Joris Lochy noted that, “As the financial services sector is probably the most data-intensive sector in the global economy, the impact of Big Data on the sector is hard to overestimate.” But today, the financial industry is witnessing “the Big Data flood” – a trend that started a few years ago, and is still seeing numbers consistently increasing. Essentially, it means that the amount of data generated each second is growing at a phenomenal rate, and a GDC prognosis estimates that by 2020 the growth per second will reach 700%. This specific trend can be described with “3Vs”, as explained by Jennifer Trelewicz, chief business officer of blockchain platform Credits (CS): “When we consider the 3Vs of Big Data – volume, velocity, and variety – it is hard to think of many sectors whose requirements fit nicely into the guidelines.” But the finance industry is the exception that proves the rule.
Let’s start with variety: banks and other financial institutions have to deal with various types of data every day – transaction details, credit scores, risk assessment reports, etc. Furthermore, they produce extremely high volumes of data, for example, JPMorgan Chase, China Construction Bank Corporation, BNP Paribas and other serious players in this field generate terabytes of data daily. Being able to process such volumes of data means gaining a serious competitive advantage over the rest of the financial institutions. Then there’s velocity. Generally speaking, storing and processing Big Data in the order of 105 transactions per second or more is considered a normal speed.
Financial markets, can generate data at these speeds with no problem at all. In fact, today, handling more than 1,000 transactions per minute is not unusual. However, you also have to consider that these 3Vs would be absolutely useless without one more “V” – value. In the financial industry, value corresponds to applying the results of Big Data analysis in real-time and making business decisions based on that information and analysis. Think customer segmentation based on individual customer profiles, cross-selling and up-selling, customer service delivery improvements based on customer feedback, discovering specific spending patterns, making customised offerings, risk assessment, identifying the main channels where a customer transacts their credit or debit card payments and ATM withdrawals, fraud management, and prevention.
Looking at that last point as an example: according to ExeisCounseil, thanks to the Big Data – which was used to create analysis models for fraud management and prevention – Visa recorded $2 billion in annual savings in 2011. However, Hassan Mohamed, financial operations and credit management analyst in the EU markets, says that, “Not all Big Data will provide sophisticated insights with value. Therefore, industry leaders must ensure investing in their own data will be profitable and is aligned to their business capabilities, people skills, and corporate vision.” So what does that mean for the future – if the finance industry is already one of the world’s most data-driven sectors, where do we go from here? Well, experts in the industry say that we’ve seen nothing yet. David Gledhill, group chief information officer at DBS Bank noted that so far “We have only just scratched the surface. Over 98% of the data analytics world has yet to be explored. The next step is to scale up the use of analytics.”
A report on the future of digital banking by KPMG says that over the next decade we will see more changes in the financial industry – and particularly in banking – than we’ve witnessed in the past 100 years. According to KPMG, by 2030, data will fundamentally transform the nature of financial services and most sectors of the world’s economy, as it will be at the heart of how banks will deliver value to customers. Perhaps it is hard to imagine right now, but financial institutions will use Big Data to build a 360- degree view of their customers, not only for compliance with regulations but to increase the value of services they offer. It is predicted that in ten years, traditional boundaries within the financial services industry will disappear, with a move towards “platformication” – where banks allow customers to choose services personalised for their needs from a range of providers. The future relies heavily on Big Data. This also means that financial companies and institutions need professionals that can work with it.
An EY study, which focused on the future of finance, revealed that 53% of respondents agreed that Big Data and advanced analytics will be the most necessary financial skills five years from now. Financial institutions around the world also know that the sector has been recruiting and hiring data scientists at rapid speed in recent years. As a result, new roles – such as the financial data scientist – have emerged. No doubt: the financial industry is taking advantage of technology trends, and it looks like financial services will be seamlessly integrated into our lives in the future, helping financial companies understand us like never before