Big Data, a new resource in the Financial Services Industry
Would you store your life savings with Apple or Google? Technically speaking, we can already do so. Yet almost all of us have kept our money with traditional banks and their regulated ecosystem. Despite their faults, we still trust banks – and I believe that offers them a significant opportunity to beat today’s technology giants at their own game, by leveraging on big data.
In the financial sector today, everyone is talking about data – how it is already fast becoming banking’s biggest asset. The main problem that most banks face is one of having too much data: decluttering, structuring, and analyzing 20 to 30 years of databases from legacy systems. Part of our job at Oracle is helping banks get to the point where they can start to leverage data as efficiently and effectively as possible. But the question remains: how could banks use this data? The possibilities go well beyond financial services.
Data as the Key to the Consumer & New Business Models
With the data that they already possess, banks can potentially advise and guide their customers through major financial decisions. For instance, banks may use a customer’s data to recommend where they might want to buy their property, or how to manage budgets for their renovation. Banks could also connect them with third-party services like utilities, tailored to their needs. In such a scenario, the customer is no longer directly buying a mortgage. They are involved in decisions leading to the building of a home, which is the underlying goal behind why they bought into a mortgage in the first place.
These new digital business models make for an incredibly diverse and rich range of opportunities for banks to break out of their standard sources of revenue. It potentially transforms banks into a data source for financial decisions big and small, from paying for a cup of coffee to starting a new business or job relocation. This could even mean a future without bank fees – where banks make their money not from their customers’ transactions, but from sourcing their data to other service providers. Banks are in an ideal position to capitalize on this data, given how much of it they already possess – if they can maintain and grow the public’s trust in them.
From broker to advisor
To date, banks have done well in this regard. Most consumers, at least in the developed world, trust the diligence and scale of the banking sector to hold onto their money, rather than doing so on an individual level (by, say, hiding it under their mattress). The same principle of trust can and should readily extend to their data, and arguably more sensitive commodity than money is. This is where today’s technology giants have struggled, rocked by scandals over misuses of consumer data and a lack of transparency in its collection. Banks, within their tight sphere of regulatory scrutiny, have far fewer issues in that regard.
To become Big Data giants, however, I expect banks will have to change how consumers trust them. At present, banking customers have what I would call transactional trust in banks. Customers believe that after putting money in an account, it will be accessible anytime, anywhere, with minimal risk involved. Advisory trust – where a customer relies implicitly on banks’ recommendation and turns to banks as the first source of counsel in their decision-making process – is still sorely lacking. Even in the corporate and B2B space, most institutions treat banks more as financiers or capital providers, rather than close counselors whose interests align with theirs.
How can banks cultivate that advisory trust? By acting as trustworthy advisors. If Banks can harness customer data to understand and develop appropriate digital business models, consumers’ perceptions will start to change. Trust will begin to grow. Transparency about how data is used – by both banks and third-parties – and constant attention to compliance will be critical to how those business models develop. But from what I see, banks already have the fundamentals to become Big Data leaders in place. All banks need are an open, hungry attitude to develop new services beyond the financial, and the right technology in place for managing vast volumes of data, to awaken the giant within.
Banks around the world are already starting to rouse themselves to the prospect of using Big Data to earn back customers’ trust. What occupies your top priority for data and analytics within your organization – and to what extent has it become the new currency of your business model?
Talk to Conor Colleary
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