According to a study, 90% of the whole world’s data was created in the last two years. This sounds quite cool but what does the world do with all that data? How does one analyze it?
The answer - data science.
Data science has taken the world by storm and has transformed our way of thinking and analyzing available data which in turn has revolutionized every industry on the planet.
What is Data Science?
Data science uses a combination of statistics, mathematics, machine learning, and visualization to extract important insight from the data held by an organization. Recently data science tech has become quite accessible for fintech companies because of the digital services provided by data mining.
The customers are becoming more digitized because of the easy access to technology. This has enabled fintech companies to focus on new and improved ways of delivering banking and financial services to consumers.
Due to its evolution, fintech has almost disrupted every aspect of the financial sector. But most of these successes came along with big data analytics. Let’s explore why big data analytics is powerful as compared to traditional methods.
How do You Define Big Data?
Big data refers to the huge volumes of structured or unstructured data. Generally, big data is huge in volumes (even in petabytes) and can take any form (text, images, audio, video) and collection of such data in real-time.
What’s the Importance of Big Data for FinTech?
Fintech companies are doing better than the traditional financial firms because they using advanced technologies to predict customer behavior based on the tremendous amounts of data available to them.
The data available is gathered from several sources and the characteristic of it being real-time increases the challenge for traditional companies.
Fintech businesses, on the other hand, have the knowledge and resources to make sense of the data in real-time. This allows them to make smarter decisions and can assist in creating personalized experiences for their customers.
Hence they rely on data to provide better services to their customers instead of just shooting in the dark.
6 Ways FinTech Firms can Utilize Big Data
Now that we know how valuable data is for fintech firms, we will now focus on the core benefits that fintech firms have due to big data.
1. Enhance Security
Financial firms have always been plagued with fraudulent activities from the beginning, certain steps have always been taken to counter such attempts.
Fintech has certain benefits over traditional financial service providers as they can analyze data and deploy reliable fraud detection systems. These detection systems would be able to spot irregular patterns and can generate alerts based on the activity to alert the owner.
2. Customer Orientation
One of the major benefits of having access to a huge repository of user data and technology/knowledge is the ability of customization. This might sound stupid but big data is capable of generating specific services for specific consumers so that the firm does not have to push the same generic system to everyone.
The system could be based on many factors including but not limited to age, gender, wealth, and location. These customized services use advanced modeling techniques to get things in order.
3. Better Risk Assessment
Data analytics combined with machine learning provides fintech companies to better predict certain events. This allows firms to be better at risk assessment which in return results in them performing day to day tasks with more financial certainty.
To achieve this no stone is left untouched as information from several sources is included in the end. This predictive analysis behavior is resulting in better banking without worrying about risks.
4. Unparalleled Customer Service
Customer service is the key to every successful business. According to a study, customer service would be more important to the consumer than the price of the product by 2021.
Hence having suitable and customizable customer service is essential and luckily it is provided by big data. Data and forecasting based on consumer data (like their banking activity) result in fintech firms providing the right services to the right people.
5. Robo Advisors
Digitization has led to the introduction of robotic financial advisory services. These are owned by fintech companies and do fall under the category of customer service but they have a bigger role to play.
These advisors use machine learning approaches and paired with the data available on clients can provide better advice on investing in the stock market and insurance. These work with little to no human interaction.
6. Cloud Services for Data
There have been cases where the gathered data was quite large for a firm to handle on-site, to tackle this, advancement in the cloud computing department has solved this problem.
Firms can buy cloud computational capabilities to get the most from their data and increase the feasibility of their projects. This results in trust-building with the consumers as they would know where their data is being stored along with increased data processing power of the firm.
Another benefit of using cloud services would be the enhanced security that they have as some firms are way behind in having better security features.
Fintech firms are quite new and are a part of the fast-developing industry. They have the technology and knowledge to use large amounts of data to their advantage.
This huge volume of data is referred to as big data and has quite promising features for the improvement of our financial services. Unlike brick and mortar banks, fintech firms employ data mining techniques to improve their services and empower them to improve their structure.
Big data can also be used to launch social media campaigns targeting specific users based on their requirements.