The role of Big Data in the 2020’s fintech revolution
While it is a cliché to observe that data is the gold of the 21st century, few have considered the role of processing in this metaphor: raw data must be processed to become precious.
At the scale of most businesses, the volume of data is too great for humans to handle, so we must turn to data science.
This is especially true in today’s current situation as more people turn to technology to stay connected and keep their businesses afloat. Big data processing allows companies to complete complex tasks like risk assessment, providing financial access to groups of people who were previously inaccessible.
Nascent big data technologies such as machine learning have already been applied in fintech.
At Channel VAS, we apply big data processing techniques to our micro- and nano-finance solutions and enable lenders to provide credit to the underbanked at greatly reduced costs.
Such techniques are still in their infancy, but as they continue to advance over the coming decade they will further empower fintech firms to serve new customers, especially in the developing world, and leave an indelible mark on the global financial landscape.
Big data as a key enabler of financial services innovation
Big data has revolutionised value generation for the financial services industry.
Providers constantly strive to innovate and improve their tools, services and offerings to enhance customer loyalty and surpass their competitors.
In this struggle, big data and machine learning are key. They allow fintech companies to complete the typically protracted and expensive tasks of credit risk scoring and assessments faster and more affordably.
Emerging markets are the primary beneficiaries, as they seldom have an established credit registry.
These technologies are also able to process mobile phone usage and payments data more effectively, in order to help lenders in emerging markets understand credit risks.
Similarly, the ability to produce new credit risk models for nano- and micro-finance benefits the underbanked by providing a broader range of options and access to the financial highway.
The continued evolution of big data
Big data’s utility will grow concurrent with the evolution of the Internet of Things (IoT), progressing mobile technology, and more advanced authentication techniques.
Fintech companies will, therefore, continue to focus on the accumulation and processing of data by actively investing in data science departments. For instance, at Channel VAS, we rely on big data to develop the proprietary analytic tools and credit scoring algorithms which form the foundation of our business.
Such developments have generated new lending possibilities for previously underbanked and underserved audiences.
Data science and fintech are joined-at-the-hip, and together they will overturn the traditional approach to doing business before the decade is out.
This will be particularly apparent in early fraud detection and preventive security, where collection and analysis of data – rapidly and accurately – will provide unprecedented safety.
Similarly, comprehensive customer profiles, customer segmentation, personalized financial offerings, and process automation are other areas that big data will transform in the 2020s.
Overcoming regulatory hurdles
For big data to truly realise its immense potential, however, a drastic shift in the regulatory framework is required. Regulators still seem stuck in an outdated mentality that prevents them from unlocking big data’s true possibilities.
The pandemic has revealed the importance of a robust digital financial system, particularly in emerging markets.
To make this the decade where the unbanked move online, regulators must develop a centralised database by consolidating and centralising data from other regulatory parties such as financial institutions, insurers, telephone companies, aggregators, and payment services.
Such a centralised database must not only be agile and enabling, but also committed to mitigating risk and maintaining the safety and security of all stakeholders.
Fintech companies could then access the aggregated data with full customer consent to provide them with services.
Hopefully when we emerge from pandemic lockdown we will have a greater appreciation for the digital tools that we have relied upon, and regulators will realise that digital alternatives to conventional services are feasible after all.
All indications are that these services will become more pervasive, seamless and customer-focused over the next decade.
Therefore, regulators, banks, and mobile network operators need to join hands with fintech providers to fully utilize big data for the ultimate benefit of the customer, in the years to come.