According to the Article I found on Forbes “What’s Driving Financial Services? Think Big Data”, Big data has been delivering a desperately needed competitive advantage to finance industry that is still struggling after the worldwide financial crises. The competitive advantage that it is stressing to the finance industry is to try and return to profit margins of old. Cost reductions and the traditional business models alone cannot do the job. All banks and financial services firms are turning to big data. They are doing this using specific insights pulled out of daily transactions, market feeds, customer service records, location data as well as click streams to gather a new business model and transform how the services can go to the market. According to a survey, the article claims, that there are four main areas that financial services firms still need to get right. The four areas include: Customer analytics, big data integration, internal data, and strong analytics. According to the article 55 percent of financial industry respondents surveyed that customer centric projects were their top priority, no longer the products. This is why customer data has become the main point in which operations and technology systems revolve around, they have eliminated the works of focus groups. An example of this would be ANZ Banking Group, they are starting a digital assistant that regional bank managers will use to go through every information they have on a client, their own services and updated market trends to make smarter, faster and more personalized recommendations for the wealth management clients. Most financial companies can’t make the most of big data without integrating together systems that can handle the growth in volume, variety and velocity of data and share it throughout their corporation. However the survey shows that just 53 percent of the banking and financial markets companies have integrated information systems. This shows that integration is the clearest way to jump ahead of the competition. Internal data, according to the survey, is said to be the primary source of big data that financial services firms are mining in their new projects. 92 percent are said to be sifting through transaction data while 81 percent are looking at their log data or information that has been logged but not yet analyzed. The survey also reveals that the financial industry is behind with making the most of other data such as analyzing audio data and social data. Strong analytics is big data’s key to helping the financial services industry come back from its set back a few years ago. However the financial services industry is lacking in certain areas of analytics which other industries have been taking advantage of. The analytics capabilities that the financial services firms should be eying in on are social media, streaming, video and voice analytics. According to the article these are crucial for handling the unstructured data that makes up so much of the big data. Overall the point that this article is making is there is no industry that needs to profit more from big data than the financial services industry. Due to their set back a few years ago there is no better way the industry can see potential profit than in big data.
Source:
http://www.forbes.com/sites/ibm/2013/07/31/whats-driving-financial-services-think-big-data/
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The key take-away from this article is not that financial institutions need to acquire the software or hardware to mine data; it is that they must acquire people with the skills to mine the data. That may end up being a more monumental task then system integration which, as we discussed in class, is no easy feat. As Pat wrote about in his blog, Wall Street is having a difficult time poaching college graduates from Silicon Valley and other, more appealing tech firms. Financial institutions have a reputation that does not appeal to the tech crowd.
Unstructured data coming in from social media and other outlets is where financial institutions may end up finding the most value. This type of data is also the most difficult to interpret and requires skilled analysts. Finding answers in the data is one set of issues; the other is determining what questions to ask. Aimlessly sifting through data may reveal trends, but if no one is looking for them, they might be missed. The article below lists a number of steps that financial institutions ought to keep in mind as they are attempting to extract insight from unstructured data.
http://www.cmswire.com/cms/analytics/extracting-insight-from-unstructured-data-027268.php
Big Data has become in many aspects the way of the future for financial services corporations across the United States and the globe. Data has been harvested from many industries and compiled and sold to companies for decades. And now financial institutions have begun this process in house in order to reduce their cost structures and keep the information from themselves. The data they have harvested in this setting can be considered intellectual property as the process of retrieving the information is a closely held secret. From data mining a financial firm can make predictions about movements in markets and gauge customer sentiment about a sector or a specific stock.
The industry is moving in the right direction and the next step might be in a setting such as Tradeking.com, where investors can arguably begin to data mine for themselves and view information that is publically available. For instance if an user is on Tradeking and is known for the advice that they give to be sound, another user might want to follow their trading to in line with the expert user. A Twitter feed type interface might be implemented to show what the user is purchasing and other users may share this information. If this social media type trading becomes large enough than there could be a Cramer-like effect on the market, arguably on a much smaller scale however this original expert user may have an effect on the market.
When it comes to the future of the financial industry, there is no question about it, the tides are changing. As cited in the article the financial sector is still on its path to recovery since the crisis in 2008, and along this path comes innovation and change. The implementation of big data and employees with the skills to manage the IT infrastructure involved are crucial to the future success of major financial firms.
The shift towards big data is by no means a new concept, in fact in an executive survey of Wall Street executives conducted by NewVantage Partners 96% of executives stated that they are planning or have already begun to implement big data initiatives. Furthermore 80% of executives reported that they have already completed one such initiative at their respective firms.
With the rapidly evolving state of the financial industry it is not surprising that Wall Street firms are adopting any new innovation that can give them a leg up on the competition. The Forbes article pointed out the fact that finance firms have yet to grasp the full potential of big data implementation. However, even after just scratching the surface of what big data has to offer financial firms have begun to reap the benefits. Big data has not only given firms the ability to analyze decisions faster but also at a lower cost. In the same survey by NewVantage 87% of executives reported faster time-to-answer (TTA) metrics but the need for improved data analytics as the primary driver of their firm’s investment in big data.
In addition to the acceleration of financial firm’s analytics capabilities is the lower costs they will be subjected too. The traditional style of data analytics is no longer reliable, the cost to gather, organize, store, and analyze data is simply too much in a time when firms are streamlining the whole process. The implementation of a big data infrastructure means decreases in expenses across the board including; less expensive technology, expert labor expenses, and the decrease of critical data that must remain in storage.
In summary big data will allow finance firms to analyze new and old data faster, decrease costs of data management, and act faster in a consistently accelerating market environment. It is true that big data has really only started to affect the finance industry, but what will really hurt the future of a firm is delaying the implementation of these innovative platforms. It’s not only Wall Street that is changing, but rather the global financial market as a whole. The need to cut costs and outpace the competition has never been higher, and big data is the answer.
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