In the financial industry, there is a growing emphasis on Big Data and the possibilities which lie within it. Big Data possesses profit making opportunities and challenges for the fintech sector in particular, due to its technological grounding, and we’re just at the beginning of seeing what such a large mass of data on consumers and transactions can create.
The market for Big Data technology and services is expected to grow from $3.2 billion in 2010 to $16.9 billion in 2015. And the amount of digital information created globally in 2005 was less than two-tenths of a zettabyte; in 2020 the world is expected to produce more than 34 zettabytes of digital information.
That’s a lot of money and a lot of data. But why are we beginning to see so many companies get behind Big Data in fintech and see so many start-ups enter the fintech market because of it? Because 62% of companies believe Big Data has significant potential to create competitive advantage.
Big Data gives innovators the ability to drive forward hundreds of digital, technology and internet based industries and create new profit sources, better customer experiences and new technologies which shape the way we live. Big Data in fintech helped incubate the industry and, as it becomes ever more proliferate, new challenges and opportunities will be faced. This blog post outlines some of the challenges which will be faced with the growing usage of Big Data in fintech.
Quality of Fintech Data
The data which is harvested from channels such as social media and mobile networks is advanced. Tech giants such as Facebook and Google could fill filing cabinets with information on each individual which uses their services; tech giants use this data to change the adverts we see, influence what we buy, tailor our browsing experience...and so much more. Data on consumers, the way that they behave and what they want is easy to access and is of a high quality - they willingly hand it out every time that they interact with the internet.
So for every industry, including fintech, Big Data concerning online habits is advanced. But a type of data which isn’t advanced is quality investment data which is a real pain point for established financial institutions. Each financial institution, brokerage, or advisory firm looks at its information differently; normalizing data across the industry is not a trivial undertaking. Established firms have been slow to adapt information and technology in this area and the industry relies upon start-ups to create change.
The customer information discussed above is crucial to developing new front-end technology, winning new custom and providing the right experience for customers BUT without the right data on investments and financial markets, advancements in front-end fintech do not hold as much value. Creating high quality Big Data is a crucial challenge facing the development of the fintech industry.
Although there is a large amount of quality data regarding the way in which consumers behave online, interact with their banks and spend their income, the fintech industry wants more. Big Data is providing a wealth of opportunities right now but more data brings even more opportunities and innovation. The challenge? Keeping consumers happy about all of the data which is collected.
Consumers have concerns over privacy, and rightly so with all of the headlines about it recently. A number of privacy concerns have arisen due to recent hackings and leaks of private information. There is plenty of debate over what this will mean for the future of data gathering and handling, but one thing that’s certain is that whatever advances the fintech industry makes in joining up the Big Data dots and however much more data is desired, they need to keep consumers on their side. Some traditional financial institutions have already felt the need to step up safeguards for new payment technologies like Apple Pay to keep their customers happy and safe. Negotiations between Apple and one of the UK’s largest banks stalled over terms including what data Apple will be allowed to access, according to the Daily Telegraph.
Just take a look at the outrage which has stemmed from some of Facebook’s somewhat questionable data use. We could consider Facebook to be Big Data handling experts but when they created “digital guinea pigs” out of Facebook users, many believed that they went too far.
Consumer Learning Curve
Another challenge for putting Big Data in fintech to even better use is the learning curve for customers of the industry. With any technological development or innovative product launch, change agents need to make sure that it isn’t just a technological change that they want but also that consumers, and the rest of the industry, want. If that’s not the case then the technology may be too advanced and a step too far for today’s society.
If the new financial technology or system comes at the right time then consumers also need to know how to use it. How will the fintech industry ensure growth of new technology? How will the early innovators teach their connections to use and benefit from the new technology? For all fintech developments, acceptance of the technology, an easy to grasp interface and a smooth user experience is crucial.
Fintech Customer Experience
The final challenge which we would like to highlight, as the fintech industry attempts to grow further with Big Data, is the need for a better customer experience across channels. In every industry, customer experience is playing a more crucial role in competitive advantage and differentiation.
Contactless cards are a great example of a fintech development which is improving the customer experience. With Transport for London (TfL) now allowing the use of debit and credit cards for tapping in on the Underground, trains, trams and buses (rather than just the traditional Oyster cards) more people are adopting the contactless technology. Contactless technology is a far more convenient way to pay for travel, thanks to its ease of use and there being no need to top up a prepaid card.
According to Econsultancy’s latest Digital Trends Report, customer experience is seen as the standout imperative for 2015 and beyond, with 22% saying it is the single most exciting opportunity this year. Creating an experience which maps across the multiple channels which consumers use to interact with businesses will also be crucial.
No matter what fintech advances are in the future, fintech firms face the challenge of not only making financial management and transactions quicker and safer but also the challenge of making sure that they fit into everyone’s strategy of providing a better overall customer experience. Otherwise new innovations won’t be accepted by commercial banks, retail stores, online sellers or consumers.
These are just a few of the challenges which will have to be overcome as the use of Big Data in fintech becomes even more proliferate. Big Data doesn't just present challenges for the industry though, it also presents a lot of opportunities. Look out for our next blog post where we will be looking at opportunities for the fintech industry.
Are there any challenges that we have missed out? Let us know in the comments section below.