Bank(ing) on big data - Banks or fintechs?
- By Chetna Narayanan and Prasanna Sekar
Today Data is omnipresent and is one of the most talked about topics across the table - anywhere and everywhere. But if you think that only the availability of data makes sense to create better offerings or to generate better value in the financial services (FS) industry, then the answer is a big 'NO'! Why? Because only the proper channelization of data will create value-based offerings for customers.
Though banks have huge amounts of data available to them, they, inadvertently, do not utilize this data to the extent they are supposed to in today's highly competitive marketplace. Banks have in their possession a significant amount data, which can be represented as the voice of the customer (VoC) on different social media platforms to understand customer needs and behavior. Unfortunately, they are not technically competent to utilize this data to create a more engaging customer service
Banks own and enjoy the advantage of data volumes, which comes in all shapes and sizes: horizontal, vertical, structured, semi-structured, and unstructured. Despite banks and financial institutions being such significant custodians of financial data, they do not use data points innovatively to create value-based offerings to customers as they are still struggling to be technically competent. However, they are powerhouses in terms of data collection and this is where fintechs firms like PayPal or TransferWise - are playing an active role in building customer-centric products and taking the financial innovation concept to banks
Among fintechs, big data analytics is one of their favorite roundtable discussions as they are utilizing and putting data into action by creating value for traditional banks through increased efficiency and cost reduction.
Banks provides plethora of customer data but it's of no use if it cannot be retrieved, validated, disseminated, and effectively converted into actionable insights. Today, fintechs are helping banks to disseminate the customer information so they can use it effectively to do deep dive analysis of consumer's financial behavior, enabling the delivery of much more personalized and comprehensive range of services.
For example, Barclays uses big data and Hadoop to come up with services called the Local Insights and Smart Spend. This is their attempt to stay technologically competent to understand and engage with their clients.
Fintech firm Trulioo has created a first-of-its-kind database for rural African population, which will help in searching for personal data across regions, which was not even previously considered by big banks.
Fintechs 1010Data and Xignite have created new, cloud-based data-sharing models, which will be useful for countries like Luxembourg, which is stringent on privacy regulations.
As fintechs continue to evolve their big data and analytical offerings, banks will establish and define each customer's experience according to individual's requirements, much before s/he can request a specific service. Though banks have started to adopt big data more and more over the last few years, there are still a lot of areas in which it could be leveraged and hopefully we will see more innovation in the use of big data techniques by banks.
Financial innovation is no longer a game of isolation. The owners of data (banks) and the kings of innovation (fintechs) are collaborating with each other and they need to as the former possesses the scale of data and the latter has the ability to convert that data into real-time actions - to take the FS industry to greater heights of customer innovation and deliver a truly engaging experience.