Over the last few years, the finance industry has undergone a massive change due to the widespread digitization and the adoption of technology. Machine learning, AI, and predictive analysis has completely transformed the way in which financial institutions work. It has also helped them leverage their strengths and deliver a superior experience to their customers.
Since data is the reigning currency in finance, Big data has become an integral part of the industry. There is no longer any need for humans to keep crunching numbers as technology has made it possible for computers to execute the job flawlessly. Leveraged properly, Big Data can make a massive difference in how the financial services sector functions. Here are some key benefits of Big Data you need to know:
Increases the accuracy of financial models
Predictive modeling is popular in the finance sector as it helps analysts to predict the returns on investments. With Big Data, it is possible to improve predictability. It can be utilized for making precise predictions and identifying the risks early on. This can, in turn, help investors make better financial decisions.
Improves fraud risk management capabilities
Big data plays a crucial role in helping financial institutions mitigate a host of risks and fighting information asymmetry. When you have access to real-time data, it becomes easier to track fraudulent activities. A common example is how banks track fraudulent transactions on credit cards when the same card is swiped in two different locations within a short time span. Big Data can be analyzed for detecting user behavior which can, in turn, help in fraud monitoring.
For example, VISA tapped into IMC’s‘ in-memory computing’ platform back in 2011 to dive deep into Big Data and use it for credit card fraud detection.
Improves customer experience
Striving for superior customer experience is critical for any finance company that wants to beat the competition. Big Data makes it possible for such institutions to gather valuable insights about customer behavior and tweak their offerings accordingly. It can also help them predict the future needs and behavior of customers, making more sales and improving the level of customer satisfaction.
Delivering customer-centric products can help financial firms to capture more markets and increase their user base. For instance, it is possible to create an analytics platform that tracks the client’s payment behavior. This data can be used for targeting specific loans to customers, resulting in a better customer experience.
Shortens the lifecycle of making a sale
If the path to purchasing a new financial product is complicated and offers no flexibility, the chances of alienating a potential customer are very high. However, by using Big Data, companies can gather data from multiple sources, identify key metrics such as spending patterns and credit information and make it easier for customers to get their hands on a new product.
Big Data also makes it possible for banks to develop products suited to the unique needs of their customers. For instance, by following the market trends during a recession, they can offer customized mortgage products to their customers.
Promotes better workflow within the organization and enhances employee engagement
Having a streamlined workflow can massively benefit financial organizations. Given that there is an ever-rising need to modernize financial services, Big Data can help firms to develop a platform that integrates all information about the logistics of the business and focus on creating better products and understanding the gaps in their operations. Plus, a streamlined workflow can significantly reduce the time spent on tasks.
Big Data can also be useful for financial companies to improve the employee experience. You can use it for tracking various performance metrics of employees and identifying high-performing assets. You can also use it for comparing different metrics pertaining to an individual’s performance.
Weeds out high investment risks
With Big Data in the mix, investments are no longer a guessing game. It is possible to precut which investments will pay off, saving investors from gambling their hard-earned money. Until the advent of Big Data, banks and financial institutions had to rely on a lot of guesswork to follow market trends and make a prediction. However, by using data analytics, firms can process huge volumes of data within a short time frame and predict with greater accuracy, giving investors a chance to generate a substantial return.
Big Data is no longer a mere buzzword. It has made a real impact on how the financial sector functions. Having said that, there are significant challenges posed by Big Data, such as protecting the data and complying with the regulatory requirements in various jurisdictions.
Nevertheless, financial firms can genuinely benefit from Big Data provided they adopt a clear strategy and think through how it can address the unique needs of their business. Lastly, it is also crucial for firms to select the right platform that allows them to collect data in real-time seamlessly. Once the logistics are taken care of, businesses can use Big Data to gain a competitive advantage in the market.