Big Data in Banking: Many Challenges, More Opportunities
As the importance of big data grows, its effects on the banking industry are becoming more and more apparent. Online-only banks are becoming the norm, banking executives report mounting concern about technological changes and legacy systems are struggling to keep up.
However, the future holds a great deal of potential for positive change, and a few of the most forward-thinking organizations are already capitalizing on that. In my last post, I talked about how financial services organizations are winning with data. Now, let’s find out what’s going on in the world of banking today, and what’s likely to happen tomorrow.
Before we delve in to the impact of big data, let’s learn a bit more about the role of modern technology in the banking sector.
Both commercial and retail banks are contending with ongoing risk, compliance and lack of perspective into their breadth of products and clients. Specialist or niche providers, such as Silicon Valley Bank, continue to win market share across both consumer and commercial banking services such as lending, treasury and card.
Meanwhile, traditional retail banks with physical branches and high headcounts continue to offer valuable services to consumer and business clients. However, they are struggling to compete with online-only banks, which offer many of the same services as their fixed-location competitors, but with lower fees and higher savings rates.
For this reason, online-only banks have successfully broadened their customer appeal, especially among newer generations: a survey conducted in 2016 by Bank of America found that Millennials (68 percent) and Gen Xers (70 percent) are the age groups most likely to use digital banking services, compared to the 62 percent average across all age groups.
The online-only banks, which are part of the FinTech movement, are also increasingly adept at offering self-service features, particularly through mobile applications. Once again, this serves to broaden their appeal with newer generations.
This shift hasn’t gone unnoticed: in a survey conducted in 2016 by PwC, 25 percent of respondents reported a concern that their business could be lost to standalone FinTech companies within five years.
And, 81 percent banking CEOs-more than any other industry-are concerned about the speed of technological change.
On the lending front, peer-to-peer lending marketplaces are growing faster than traditional bank lending, while traditional banks fight back by creating small loan networks.
In this space, top imperatives include advancing omni-channel marketing capabilities and developing impactful user converged applications while managing risk and compliance.
FinTech is a major disruptive force in the financial services industry.
By definition, FinTech refers to the fast-moving, predominantly mobile and online-only financial services companies or solutions. In its 2017 Global FinTech Report, PwC found that on a global scale, 88 percent of incumbents believe part of their business is at risk due to the rise in FinTech, a 5 percent increase from last year.
Knowing this, it’s not surprising that 82 percent of all companies expect to increase their partnerships with FinTech companies over the next three to five years. This percentage can vary from country to country, though in all countries it remains well over 50 percent.
As big data gets bigger by the day, a wider variety of data is being generated by an increasing number of sources.
