Big data has been revolutionising the banking and payments sectors for some time, bringing more information than ever before to the table for analysis and changing the way our financial services systems work beyond recognition.
Big data has paved the way for new and improved services, with reduced risk in many existing areas, providing banks have the technology and human resources to collect and analyse big data effectively.
Thibaut de Roux is involved in a start-up with links to big data, artificial intelligence, digital and technology and is interested in where each of these fields might be going. There have been various predictions made about what will happen with dig data in 2020 and what themes we can expect to see emerge.
Many of the world’s leading banks are in the process of transforming themselves into data-driven organisations, adopting a host of new technologies to facilitate data transformation. The critical enabler in this scenario is big data, driving the creation of multiple new business models and providing gateways into new segments, using non-traditional metrics to generate more revenue. High-risk segments, such as rural businesses and SMEs, should see more options for lending opening up as banks are able to harness big data to make those segments commercially viable.
Boosting IT Capacity
With most banks seeing big data as a large part of the future, existing IT systems will be undergoing continual upgrades throughout 2020 and beyond as financial institutions begin to bring in the systems required to process vast amounts of information effectively. Investment in areas such as cloud storage, new processing and storage capacities and even core systems is expected as banks either overhaul their existing systems or replace them with newer models.
Increased Compliance Burden
Handling larger amounts of data naturally results in an increased compliance burden, particularly for retail banks. Operations will need to be adapted on a fundamental level in 2020 if banks are to ensure that the remain compliant with increasing regulations. In the short-term, this will result in increased operational risk, reduced efficiency and increased costs for many banks. These costs will lead banks to increase their reliance on regtech, bringing in technologies that can help reduce the compliance burden and lower the costs of complying with regulations. This brings its own advantages and disadvantages as new partnerships must be formed and new systems integrated, which requires time and effort.
In order to build and maintain consumer trust while simultaneously asking those consumers to voluntarily share large amounts of personal data, banks and financial institutions in 2020 will also be working on transparency and on relationship building. Staff will need to be trained to handle objections over data sharing and explain clearly the benefits of sharing information and the security measures that are in place to protect that information, as well as what the current privacy laws are. Generating this type of trust will be a gradual process with many customers who are naturally reluctant to share personal information. Introducing algorithms that can learn creates a dynamic process, which means that binary yes or no consent may no longer be fit for purpose.