Big Data in the Space of Fintech
Fintech – a word which clearly indicates a combination of financial services and technology. It includes various financial fields such as retail banking, investments, and lending. Big data contributes to a major chunk of technology used. Data scientists and analysts have honed their skills which have improved analysis of data leading to increased consumer profits.
Big Data in the space of Fintech
- Credit Scoring: Credit scoring has been a major sector that has been leveraging benefits of big data and its analytics techniques. Financial transactions have been providing credit scores for decades. Based on these credit scores, various credit activities are carried out in the field of financial services. But now with big data, apart from quantitative data from banks, analysis is done based on data from various qualitative sources such as behavior, ability, etc. These new and innovative models of scoring have resulted in the growth of various financial services segments such as P2P Lending, SME Financing, etc. Examples of such startups include Credit Sesame, Faircent, OnDeck, Kabbage, LendingClub, Prosper, ZestFinance and Vouch Financial.
- Customer Acquisition: In the present technological era, digital channels as compared to physical mediums are proving beneficial not only to the financial service firms but also startups. As a result the cost of acquisition, especially customer acquisition, has dropped drastically. Digital channel has prominently dominated one of the four P’s of marketing – place by the customers as well as the clients. In addition, customers are more inclined these days in using digital services, especially those that also prove advantageous to clients at lesser cost in the field of financial services. There has been an increase in the number of online financial services offerings – direct investment plans, online savings/deposit account opening, automated advisory services, etc. These digital channels provide basis for big data analysis.
- Marketing, Customer Retention, and Loyalty Programs: New-age companies these days have opted for product/service advertising and discount offerings for conceptual and personalized engagements. Analytic solutions that are being leveraged by firms not only increase cross-sell and upsell opportunities but also help in better understanding of requirements of customers which provides for customer-specific packaging. These analytical solutions not only rely on historic data but obtain data from various customer resources such as behavior, ability, etc. Some of the offerings that are being provided by fintech firms are card-linked offers, customized reward solutions, etc. Some solutions in marketing, loyalty and customer acquisition space are Cartera Commerce, Cardlytics, Truaxis (acquired by MasterCard in 2012), Segmint, Personetics, etc.
- Risk Management: Digital payments especially payments in real-time environment have been in prominent use from the past couple of years. This has resulted in increased requirement of risk management solutions. In order to avoid fraud and provide for better authentication, various techniques such as device identification, biometrics, etc. are being used. These techniques act as driving forces for better risk management solutions as well as predictive analysis. These days not only banks are initiating better ways to mange and store more qualitative information about digital payments, but various regulations are also being enforced that is making it necessary for banks to maintain and manage this information. This information is not only being stored but banks are also providing for solutions that mine the data stored and extract meaningful insights. Some solutions that are being provided by startups are BillGuard, Centrifuge, Feedzai, Klarna, etc.
- Investment Management: Various investment management solutions are leveraging the power of big-data. These solutions provide for the ability utilize search data combine multiple macroeconomic factors, quantifying latest news/insights and combining all these to provide potential upside/downside scenarios. Specific startup solutions in this space include Wealthfront, EidoSearch, SigFig, Betterment, LearnVest, Personal Capital, Jemstep, etc.