The enormous potential of big data in finance
The term big data has been around for some years now. The International Data Corporation predicts that the big data technology and services market will reach $58.9 billion in 2020. One trillion data units are produced in the world every day and that number keeps on increasing. The data landscape has changed considerably, especially recently, with 90% of the available data being produced in the last two years. We now have far more data than ever before and the amount of data we can access increases daily. But what are the benefits of big data? And, more importantly, how can they be harnessed by finance professionals?
‘Big data’ implies enormous volumes of data, but the definition encompasses more than that. It includes the possibility of analysing and using growing amounts of data. We refer to the five V’s as the hallmarks of big data: Volume, Variety, Velocity, Veracity and Value. So big data isn’t just about the data itself, it is also about the process.
Opportunities for finance
The vast wealth of data has tremendous potential. Our annual FinTech Barometer found that 45% of finance professionals regard big data as the most influential trend in the financial sector. But how do they see it manifesting? A study conducted by Graydon indicates that companies that base their decision-making and business processes on big data analytics perform 20% better than those that don’t. So big data can be of great use to organisations, including finance departments. In the past, finance professionals, especially controllers, have always dealt with figures. Now, the ability to also extract insights from data on customers and the market will allow them to look to the future. Besides using big data for predictive purposes, it is also useful in:
- Gaining insight into processes and information flows. The value of big data lies in the analysis. It’s the analytics that offer new possibilities. As a finance professional you can identify patterns that inspire the creation of new business models and the development of new markets.
- Improving (financial) risk assessment and provide fast insight into the company’s current status. It enables more accurate assessment of the risks involved in issuing loans and insurance policies.
- Improving profitability is an effective use of big data. It enables companies to identify factors that will improve efficiency and reduce costs.
We see so many potential benefits. But they all depend on the readiness of finance professionals to embrace change. The increasing adoption of big data technologies will require them to adapt within their role. In the past, the mentality was ‘you ask, we produce’, with financials providing the management with information in the ledger. But big data will enable finance professionals to gain insights and identify new patterns that can help form the basis for better decisions. Finance professionals themselves are aware that the emergence of innovations such as big data means that they will need to widen their skill set. Service mindedness and customer focus are no longer enough. The results of our FinTech Barometer survey show that analytical skills (30%) and adaptability (27%) are integral for customers.
The world of the finance professional is evolving rapidly with many of the changes in the industry being driven by big data. Does it represent a threat to finance professionals? No, I don’t think so. But they would be well advised to adopt a strategic approach and develop their data analysis skills in order to add value for both the organisation and the customer.
For further insights into the impact of big data on the finance industry, download our whitepaper by clicking on the button below!
Big Data whitepaper