“Without data, you’re just another person with an opinion.”
The emergence of big data
Big data will always be difficult to define precisely and will change with time as the scale of data captured and used in the digital age continues to grow. In time, it might disappear as a concept when working with vast amounts of data becomes the norm. Today, however, Wikipedia quotes an article that offers a succinct definition:
“Big Data represents the information assets characterised by such a high volume, velocity and variety as to require specific technology and analytical methods for its transformation into value.”
As the idea of big data has gained attention in recent years, there has been enthusiasm and concern in equal measure about the scale of change it will bring to business and life in general, and the challenge of quantifying and qualifying it. It now seems that big data has emerged as a discipline and firms are beginning to approach it as the next frontier on the competitive battlefield. Evidence of this came last year when Gartner chose to remove big data from its hype cycle. The important question this raises is: “What now?”
What does big data mean for financial institutions?
The data problems that many financial institutions face are constantly growing. These are being driven by an increasingly electronic world, regulatory reporting needs, and the search for deeper insight to deliver the best customer service. This is in addition to other data problems that firms have been dealing with for much longer, such as pricing and risk calculation.
Both the understanding of what is possible and the technologies that have been developed to support massive data processing and analytics are developing at a rapid pace. As a result, a bank’s infrastructure and processes need to adapt to solve these new problems.
Whereas in the past data was often the by-product of an operational process, it is now the primary asset that drives business decisions. This will require a significant shift toward information systems that inform those responsible for strategic decision making, monitoring and regulatory reporting, rather than primarily managing and processing transactions.
This means that banks and other financial institutions no longer need to think about building solutions to specific data problems. Instead, they now need to think about a unified approach to data. This will allow businesses to be run analytically and decisions to be taken with supporting evidence from the data. The more enlightened firms will realise that the biggest opportunity will be to use the data to deliver the best and most profitable service to their customers.
However, customer analytics is only one area that will be of interest. At a time when revenue growth seems like a distant memory, data and analytics will help to optimise where a firm’s resources are directed and ensure this is aligned with its strategy.
The barriers to successfully harnessing big data in financial institutions
Today, the biggest barrier that buy- and sell-side institutions must overcome is the need to adapt structurally from what worked in the past to what is needed now. Banks, for instance, are typically organised along product lines with their own technology infrastructure. Entire systems that begin with the customer, include the banking applications and then right out to market utilities, are all organised along a line of business.