Today it’s a matter of fact that data rules the world and it continues to grow with a snowball effect. It’s being produced at an unbelievable speed through the countless connected devices that are used in our lives every day, every moment, and it’s not going to slow down.
A total of 2.5 quintillion bytes of real time data are produced every day with every opened tab, every action on web pages or social media, every video watched, even every transaction made with a credit card, and millions more.
This represents a vast land of opportunity for many visionary businesses and capital markets, and it’s much more beyond providing better customer service. This is exactly why every company, whether it is technology oriented or not, is becoming a data driven company. This, of course, includes banks and other financial institutions.
So before we dive into the importance of big data in the banking sector, let’s start from scratch and talk about what exactly big data means and what elements it consists of.
Big Data Technology Explained
Big Data is an ever-growing set of data gathered in a specific context and in specific formats such as speed, variety, value, velocity and volume. An unstructured, large amount of data collected from different sources is structured and managed by data processing systems, and then it reveals a value.
Former CEO of Yahoo, Marissa Mayer, uses a great analogy in this regard: The development of big data is like “watching the planet develop a nervous system.”
Although it really seems like a huge system we are talking about, it becomes possible to filter even large volumes of data easily and quickly with big data analytics and machine learning. From this point of view, big data can also be seen as the fuel of machine learning and artificial intelligence.
Thus, reading and processing large amounts of information with the help of data analysis offers brand new perspectives and opportunities. Just imagine–it could change the digital banking and financial services industry.
The possibilities are endless and obviously not limited to just setting up customer profiles, conducting customers segmentation, or improving customer experience.
The Importance of Big Data in Banking and Finance
The primary way to bring banking services to top quality is to provide the service that the customer may need instantly. This is just one piece of evidence that big data, enabling the analysis of customer behavior, will become increasingly more valuable in the upcoming years.
According to the International Data Corporation (IDC), by 2022, the expected global revenue for big data and business analytics solutions will reach $260 billion. It should come as no surprise that the banking industry will be the biggest contributor to this massive growth. But why?
Benefits and Advantages of Big Data in Banking
Banks and financial institutions are now moving away from traditional data collection and storage methods and combining big data in data lakes and data warehouses. This helps the data to be constantly kept up to date. Even more importantly, information can travel across all departments. And this provides great benefits for banks as follows:
- A Wide and Clear View on Business: Instantly updated and easy to reach data increases collaboration and insight sharing between different departments, enabling employees to see the big picture. Using big data, which provides valuable insights on broad market trends, customer behavior patterns, and even internal process efficiency, makes it possible to make much more accurate strategic decisions.
- Personalized Product Offering: With big data, the customer’s expenditures and past transactions can be tracked. In line with this information, the needs and interest rates of customers can be foreseen to highlight products and services they can benefit from. Thus, both maximum customer satisfaction is provided and the revenue of the bank increases.
In a world where banks are 60-70% more likely to sell to potential customers than existing ones, these insights also offer them many opportunities to cross-sell and up-sell to increase profit margins.
- Customer Feedback & Increased Retention: Big data enables us to sort, store and most importantly respond to customer feedback, questions or comments much faster. In this way, it will be easier to establish a more meaningful relationship, retain the customer and create loyalty while customer profiles are clearly visible.
- Risk Management & Fraud Detection: Since big data provides open source and access to information, banks become able to investigate the behavior and patterns of customers in detail. This ensures that possible fraudulent transaction risks in investment banking are identified, managed and their repetitions prevented.
In addition, it allows banks to ensure that there are no unauthorized trades or transactions thanks to big data. This creates an important security measure that provides protection for all exchanges and ensures that financial crises are averted before they even occur.
- Enhanced Resource Management: With big data, it is possible to obtain employee insights and develop the business accordingly on the customer side. It has extremely effective results in optimizing and improving internal workflows as well as external services. When cooperation between departments is increased, transparency ensured, and satisfaction created with employee feedback, high performance becomes inevitable.
On the other hand, big data, which helps to optimize human labour with AI technologies, provides cost savings and ensures resource management in the most effective way.
The Ultimate Big Data Solution for the Banking Industry
Increasing customer expectations and regulations have created a very challenging era for banks and financial institutions.
In order to keep up with this momentum and stay competitive, banks need support that goes beyond human labour to increase their efficiency, prevent possible fraud and manage potential risks. Adopting big data technologies provides banks with a gateway in all these areas and allows many traditional banks to survive.
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