The Value of Big Data within Banks
By Kashif Mumtaz
According to IBM’s statistics, the world creates 2.5 quintillion bytes of data a day. That’s 2.5 billion billion characters. The volume of data created is growing strongly: today’s daily output is about the same as world data storage capacity in the mid 1980’s (Source: Bloomberg Finance, Sep 2017). Big data is not just about volume but also about variety, eighty per cent of data produced now is unstructured (email, phone calls, pictures, GPS locations from devices) and unstructured data is growing much faster than structured data.
For all the apparent promise of big data, there is little written about the value of data within banks other than in relation to risk management. Banks are more regulated, carry more capital and offer less growth than many tech companies. My research suggests that the reason the value of bank data is given little attention outside of credit and money laundering risk management is because there is little evidence it is being monetised in other ways. Few banks give customers decent budgeting or wealth tracking tools in their digital channels.
That said, it is obvious that banks should have better insight into customer financial health and spending habits than Google can derive based by observing Internet search terms or Tesco’s store-card loyalty scheme can know.
Data is the new currency
Banks must use their data to grow revenues, defend customer share of wallet and drive higher customer loyalty. The general consensus is that banks will follow the customer data mining pursued by the likes of Experian in time in fact most credit card providers already mine and segment customer data to provide their partners with value through potential cross sell opportunities.