Big data is now a vital organ in maintaining the body of finance and banking. Although, It would be fair to say that big data has become imperative in every sector. It is because decision making is common in every field, be manufacturing good or investing in mutual funds.
As the name suggests, Big data is well… Big! This usually refers to any data that is too large for a traditional system, both in terms of storing and processing. However, the context has a lot to suit the title. For instance, your vacation images occupying a space of 100 MB at Barbados will be unable to reach your friend’s if you use an email. So, an email is unable to process data of that size. So, that makes your vacation images as big data.
With the explosion of ardent followers and members on social media platforms, their data is also expanding its perimeters. According to SmartInsights, Facebook has a total membership surpassing 2.2 billion users while YouTube has a user base of 1.9 billion active accounts. So, you can imagine the data they have in their systems.
So, Big data is pretty much a universal trend now.
Why Big DataThere are many challenges to the financial industry that relies solely on traditional models. A Forbes survey said that 84% of enterprises saw that big data is changing their company’s competition. We can see the relevance of big data into the 3Vs of finance (Volume, Velocity, and Variety) and how they are helpful there.
• Volume – There are terabytes and petabytes of data. The finance sector generates huge amounts of market and other vital data that needs to be kept safely for future analysis.
• Velocity – When the speed of data storage is on the order of 105 transactions per second or more, that is a place where big data is a must. Generating or transferring data at such speeds is no challenge for the financial markets.
• Variety – Big data algorithms function well with the large availability of data sources and formats. In the banking field, reference data, market data and other kinds of data are worked upon by different institutions.
Benefits of Big Data
Finance is the key aspect of an institution’s sustenance and therefore, is revered by everyone in the company. That is because touching high margins is the end goal of every company. Setting their targets, the company makes decisions as to how to proceed on with their decisions and big data is a crucial aspect of it. So, you can imagine the importance of companies that are solely dealing with finance.
Here are a few key ways finance relies on big data:
#1. Risk Analysis
Investment companies rely on an analysis of the risks present in the stock market. Similarly, insurance companies need to aware of how much risk they will be taking on when ensuring a particular customer. Here the application of big data comes in handy. It allows for the process to go much more smoothly and faster. Also, thanks to big data, accuracy in this area can be highly accurate as well as give customers an experience that will make them loyal to the brand.
#2. Customized Products
Segmentation is a crucial aspect of building your strong finances. Diving their customers, according to their location, earnings, age, and behavior will help companies create products that are suited to their choices. Financial products such as stocks and bonds, insurance, loans, investments, bank accounts, and others might not be a requirement for everyone.
Big data helps the company with the analysis of their salary, lifestyle, age, and others so that they can target their customers based on them. This will cause the banks to create products that more specific to their liking.
#3. Fraud Detection
Banks and other financial institutions have to be always aware of alleviating any activities that might be harmful to the welfare of their customers. That also involves mitigating fraudulent activities. There are already measures to cease fraud in these banking areas. But the use of big data here can be catalyzed for detecting and preventing such activities. This reduces the works of the banks and makes the process highly swifter.
#4. Trading Patterns
Although no one can completely predict the markets, still, big data is a huge help in this field. It is because big data helps in analyzing the previous data and make a prediction according to that. Historical data infused with current market parameters provide a sophisticated model of behaviors and tendencies in the market. Such models allow for a well-informed trader to delve his money into this field.
With the analytics of the previous data, it makes marketing of the products stronger; It is because, with big data, you can direct the products to the people who are going to buy it. For example, while marketing the products one has to be aware of many factors. For example, an SIP account would be targeted for people who are working and not for those who have retired and in a similar way, a college-going student wouldn’t be going for any home loan likely. So, knowing your customers helps you convey your message faster.
#6. Regulatory Norms
In the US, the Habib Bank of Pakistani Bank has been de-licensed for alleged terror funding. Without regulation on financial institutions, nations can end up into scenarios akin to the great recession of 2008. In fact, when in 2008 such an event did take place, compulsory regulations were added on many banks in order to avoid such situations to arise again. Now, not obeying these regulations could attract huge penalties. This has been possible due to big data. By analyzing the things that went wrong during the steps of any major economic downfall, experts can take measures to error-proof the current scenario so that such an event wouldn’t take place.
#7. Boosts Overall Performance of the Financial Institute
The benefits are present both for the company as well as for the customers. Employees can be assessed whether they have reached their monthly or yearly targets. Having access to the data of the previous years as well of the customers, make the bank perform better and more efficiently than those who lack the use of big data.
Big data is a key essential in every sector. However, it has massive benefits for the financial industry which was clearly elaborated in the above points. Due to this reason, many people are flocking over to this department to bring the amazing benefits of data science and big data with the lucrative look of finance.
If you would like to share any feedback with us or can suggest other benefits of Big data in the finance sector, let us know in the comments below.