Technology has a lot to play in the evolution of the Banking & Finance Industry in the last one to two decades. The service and the way the banks operated have advanced to make life easier for both the customers and the banking professionals. When the Big Data Revolution hit the various industries, the banking industry realised the opportunity avenues associated with it. This article provides an insight on the impact of Big Data on the banking sector.
How Big is Big Data in the Banking Sector?
Banking firms always had a huge amount of information stored in their database; clueless about what to do with it. Big Data has unlocked the doors converting this huge amount of data into meaningful benefits for themselves and their customers.
According to a report by Alacer, the banks in the US have currently around 1 exabyte of stored data, which is equal to 273 Billion mp3s. Typically, the source of information in the banking industry comes from the sources customer bank visits, credit/debit card histories, banking volumes, account transactions, call logs, and web interactions.
Role and Impact of Big Data
As mentioned in the above paragraphs, there are a lot of areas which have been or can be boosted due to the implementation of Big Data in the banking industry. The following points will show how it really helps in bringing positive changes to the industry:
Help in learning spending patterns of customers
Using the help of customers payment data, the banks or financial companies can understand the spending patterns of customers. This will help the companies to identify when potential customers may require certain financial services. With the help of Big Data analytics, one can see different spending patterns differentiated according to demographics, average income, etc.
Customer spending patterns can also help in identifying the customers who are your most valuable people, the ones who spend the most money. Through this data, you can provide financial offers that can help them feel valued as your customer. Also, Big Data can be used to detect high-risk spending patterns that affect customers negatively in the long run and safeguard them from a lot of pain.
Prevention and detection of fraud
Banks have to always remain aware for mitigating any fraudulent activity that may take place. This is one of the biggest problems that banks have been facing and there are already various set ups being done to prevent or detect fraud. However, Big Data can catalyse the process of detection and prevention; helping banks to reduce their process time and make effective use of the resources. Big Data can mine useful patterns that can help in raising the security standards of the industry; ensuring banks can easily mitigate any fraudulent activities before it grows bigger.
Easy customer segmentation
Banks have all kinds of customers with different financial requirements from the banks and different financial behaviours. With the help of Big Data, banks can categorise their clients based on these parameters along with the parameters already mentioned in the first point. Segmentation will benefit the banks when it comes to marketing promotions to target audiences according to the services that will be beneficial to them. This will help in building better customer relationships and not spam their inboxes.
Personalised product offerings
Another huge benefit of segmentation is that it can help banks to provide personalised services to their customers. With the behaviour patterns available from present and past customers, the banks can utilise Big Data Analytics to identify ways that they can use to retain their present customers and attract new ones. In addition to that, the banks and financial institutions can cater to the untapped niche and make banking activities more personalised.
Risk management
Risks in banking and financial industry may come in any form fraudulent activities, bad loans or failed investments. The early detection of these risks can help in preventing huge losses which otherwise may be incurred. Big Data can help in analysis problems on large scale and with the help of analytics divide them into smaller ones, which are manageable.
We have already seen some of the big financial institutions venture into Big Data and find it positively impact their business activities. In the long run, Big Data will be beneficial to both the banking or financial institutions and the customers as well. So, its adaptation can be seen in more and more companies in the near future. If you are looking to make data analysis work wonders in the banking industry, you can go for a Big Data Course. Big Data is the future.
