Big data: bridging consumer experience & increased revenues in financial services
Atanas Kiryakov, CEO of Ontotext: financial sector worldwide is using big data in an increasingly wise way
While the benefits of big data are well understood for compliance and fraud prevention, the technology can also deliver very useful insights into customer behaviour. Thanks to big data analytics, retail banks can monitor how customer behaviour evolves and any significant patterns that can inform which products to market and offer.
In the UK, Lloyds bank has announced a partnership with Google to prototype systems to allow real time analysis of customer usage data in its drive towards improved user experience and digital marketing.
Other big banks from around the world are also getting in on the act. Wells Fargo and BNP Paribas have both set up accelerator programmes to develop digital innovation and JPMorgan Chase is using big data analytics extensively to produce its JPMorgan Chase Institute reports, which report US consumer income and spending patterns from the billions of transactions generated across the country.
To survive in this new world of financial services, firms from across the industry spectrum are all making decisions using smart data insights.
Always a big spending industry on technology, IDC estimated that 25% of the total 2015 IT budget spent by the global financial services industry was on mobility, cloud and big data and analytics alone. In absolute numbers, this was $114 billion out of $455 billion spent worldwide. IDC predicts this percentage to go up to 30% by 2019.
Spend, spend, spend!
This investment is aimed at increasing customer engagement and retention. The logic goes that supplying data-driven offers and prices ultimately lead to higher returns and lower costs. The financial services industry is spending to enable itself to parse big data, extract the preferences and spending habits of each individual customer and drive the personalisation of services.
The shift from a sales focused model to a customer focused one is a major development for the industry.
An extra benefit for banks from the application of big data analytics is understanding how long a customer may stay with them, and the emotional triggers for decision making. By drawing on the links held within their data, financial firms should be able to profile if a particular client segment would be sensitive to price or interest rate adjustments or other market conditions.
For smaller non-bank lenders, big data has already played a crucial role in credit scoring of both individuals and companies.
By drawing on available data points, such as social media activity or issues affecting the customers of a company seeking finance, lenders are able to profile creditworthiness more accurately than before.
New world order
Big data and analytics will become the cornerstone of an industry in perpetual pursuit of higher return on investment, higher profit margins and increasing incomes. This is just as inevitable in the finance sector as in others, such as pharmaceuticals or publishing, where digital methods are accelerating their importance in a wider range of business activities.
In a recent Capgemini report, the importance of big data analytics was laid bare as 60% of financial institutions in North America believe it gives them a significant competitive advantage. An incredible 90% of those surveyed believed that the institutions with successful big data initiatives will “define the winners of the future”. Big data analytics is fundamentally reshaping the business practices of the global finance industry.
The analytics financial services organisations apply to their own privately held data and to publicly available sources (open data) can give them insights that were previously unavailable. Understanding the output of this data to create the best actions then becomes the differentiator.
As previously mentioned, this is where the use of linked data techniques within the analytics will deliver added value. For retail banks, this would involve profiling customers, using all the data from what used be siloed databases, in order to provide a personalised experience for the customer. For investment banks, this would involve increasing returns through better performance and risk and liquidity management. For insurers, the potential big data analytics and linked data provide for policy personalisation is phenomenal.
I do believe the financial sector worldwide is using big data in an increasingly wise way and are already reaping the benefits. Regulation is empowering customers to become less sticky, by making it easier for them to move between service providers: data analytics is the tool that will counter this very real challenge.
By Atanas Kiryakov, CEO of Ontotext
