In times of digitalisation, data is the lifeblood for companies in all industries. Or, as the Economist put it, data is the “oil of the digital era”. Data helps companies to better understand customer behaviour, uncover new business potential and optimise business processes.
As digital transformation and connectivity advance at all levels of the economy and society, the volume of collected and stored data is growing exponentially. Big Data is on everyone’s lips and business decision-makers are feeling the pressure to use their company’s data sources and to start Big Data initiatives.
When it comes to the intelligent use of data, the banking and financial world is emerging as one of the most promising sectors. Established financial institutions work with data-driven processes that have been supported by IT applications for many decades.Connectivity via new apps, devices and the Internet of Things is creating new data points: Big Data is getting bigger! Click To Tweet
Now that PSD2 is opening up the banking market to third-party providers, customer requirements are growing and digitalisation is progressing. In addition, decision-makers in the banking and financial world are asking themselves how Big Data can be used more effectively. There are many reasons why it is banks and FinTechs that reap the benefits of Big Data:
- Historical database: In contrast to other companies, banks have an extensive data history that provides detailed insights into customer behaviour.
- Increasing connectivity: The digital connectivity of customers via new apps, devices and the Internet of Things creates new data points with which banks and FinTechs can generate even more data.
- Rising customer expectations: Data provides a solid foundation for optimising the banking experience and for seamlessly integrating it into customers’ digital lifestyles – a challenge that FinTechs in particular are working on.
- Growing pressure to innovate: Financial institutions and FinTechs can derive new banking services from data and thereby significantly increase the pace of innovation.
Big Data Provides Greater Efficiency in Product Development
One of the most promising areas of application for Big Data in the financial world is the development and marketing of new products and services. With around 2.5 billion smartphones in use, customers’ lifestyles have changed radically. 52 percent of customers rely on mobile banking on their smartphones.
Conventional banking and financial services that are linked to personal contact with a bank employee or store branches do not suit this changed behaviour. In addition, Millennials and Generation Z are waiting in the starting blocks. These two generations have high purchasing power and have never known a world without the internet.
This target group is willing to generate more data and share it with banks and FinTechs if the customer experience improves as a result. This makes Big Data a two-way exchange between providers and customers that has measurable benefits for banks and FinTechs. According to a study conducted by McKinsey, efficiency in the development and marketing of new services can be increased by up to 20 percent. In other words:
- Quicker to market: Big Data helps banks and FinTechs shorten the research and development cycle for new apps and services.
- Supply meets demand: Thanks to the knowledge gained from Big Data, banks and FinTechs can concentrate on services that customers really want.