Big data is a powerful tool for financial firms to harness, allowing them to generate new revenue streams, deliver personalized recommendations to customers, strengthen security, and deliver better customer service. Some fintech companies have already utilized big data solutions to identify patterns in payments, shorten payment times, and generate more cash.
Ultimately, big data enables financial institutions to improve customer satisfaction and experience. In addition, financial institutions can now better understand their customers’ spending and saving habits and offer personalized financial services.
The financial services sector has been in dire need for a technology upgrade for several years. The Fintech or Financial Technology has enabled an evolution in financial systems, allowing banks and investment institutes to make their transactions not only fast and seamless but secure and reliable as well.
One of the first innovations in the Fintech sector was internet banking and mobile banking apps. However, with time, the industry has evolved to provide a multitude of solutions for the sector including improved AML and KYC compliance through enhanced identity verification.
Such solutions have allowed for more inclusive, yet secure banking services for individuals, in addition to providing a significant competitive advantage for banks.
This shift in technological evolution has primarily been driven by customer preferences as they get increasingly used to their electronic devices including smartphones, tablets and laptop devices.
All such devices, in addition to providing increased connectivity, store large amounts of user data.
This includes their preferences, habits, and inclinations. All this data can be used by businesses including banks and other financial services firms to provide better services to their customers.
Not only that, but all this data can also be used to increase the level of security in financial institutions. It can enable banks to decrease their exposure to data breaches and frauds.
What Does Big Data Entail?
In a technology-driven world, our devices generate a great deal of data that is both structured and unstructured. All this raw data is known as big data and can be used to generate meaningful insights by businesses.
Modern technologies like artificial intelligence and machine learning algorithms can now be used to process big data to interpret customer information for better engagement for advertisements and marketing campaigns. The same data can also be used to provide better security to clients and ensure better security in payment systems.
How is Big Data Advancing Fintech Systems?
Big Data has enabled the evolution in the Fintech sector and has allowed financial service firms to not only engage their customers in a better way but to provide them with increased security in their transactions and other services. Some of the most significant ways in which big data is advancing Fintech systems include;
Improved Customer Targeting
One of the major advantages of big data in an increasingly customer-driven business world is that it can provide companies with information that previously took months to gather manually. With big data, financial institutions can now gather information on their clients within seconds.
As companies target their customers based on age, gender, spending behavior, social and economic class, and geographic location, big data makes it easier to identify the market segment a business wishes to target. With all the data available, the Fintech sector can help banks to provide customized services to clients based on their spending patterns and preferences.
With the help of complex machine learning algorithms, banking and financial institutions can process client profiles and assess the risk associated with their business. Through modern analytical tools, investment firms can identify beneficial owners within seconds and process other financial information to develop an accurate risk profile for different clients.
Banks can also use real-world identity verification and AML checks to screen clients before onboarding them, thus enabling them to designate the appropriate level of risk associated with a client.
Advanced Fintech systems have also allowed for better fraud detection for banks and financial institutions. By sifting through previous transactions of customers, Fintech tools can use big data to analyze normal behavior for a customer. It can then use the established spending patterns of customers to detect transactions that are out of the ordinary.