How Data Is Transforming the Banking Landscape

Trade and Finance

Like in every industry, data plays a significant role in day-to-day banking activities. It changes how banks think about risk and interact with customers. It helps them in targeting new markets, strategic planning, and decision-making. Above all, the fast transformation processes are forcing financial institutions to constantly search for new ways to leverage data and predictive analytics to enhance business growth.  

Now, suppose you want to know more about how these transformative processes are influencing the banking world. In that case, this article will show you how data changes and improves the banking landscape. So let’s get into it. 

Aspect #1: The future of trading is rooted in data

As trading has always been about information, many banks nowadays are spending increasing money on data management technologies. Bank trading desks that facilitate trade executions in markets such as equities, fixed-income securities, commodities, and currencies rely heavily on data to blend trading workflows. 

Trading desks, for example, might use historical option prices to gain accurate insights and make data-driven decisions when estimating an asset’s price movement. Also, many financial institutions are already routinely combining transaction records with customer data for deeper analysis. 

Thanks to these activities, they can spot trends in customer activity and determine from where their most profitable business is coming. It is simply impossible to trade in institutional markets without access to high-quality market and reference data for the market you are trading. 

Aspect #2: Better risk management

The focus of the risk management modes in the banking industry is to manage the institution’s exposure to losses or risk and protect the value of its assets. By collecting and using as much data as possible, banks have more actionable information at their disposal. 

As a result, they can create an environment where they can be more aware of how their activities impact customers, business, and the economy. The benefits are apparent: banks secure a better and proactive approach to risk management, lower costs and enhanced customer experience. 

Aspect #3: Enhanced customer experience

Data is also fundamentally changing the way banks interact with their customers. By using data and deep analytics, banks are in a more favorable position to serve their customers better. To name a few examples:

  • As most customers have multiple financial accounts with numerous features, banks are securing increased efficiency through better access to data via apps, mobile devices, and the internet;
  • Banks can offer personalized experiences to different customers’ preferences;  
  • It enables them to quickly answer questions that would previously have taken years to respond, resulting in reduced costs. 
  • Automated data collection and analysis help operational departments to more adequately serve their customers.

TradingAspect #4: More efficient fraud detection  

According to PwC’s Global Economic Crime and Fraud Survey 2020, fraud is a growing issue with profound consequences (financial losses and loss of credibility) for the banking industry. And as most banking transactions are now digital, there is a clear need for better fraud detection models and robust fraud management systems. 

Here is where data-driven analytics can help. By using data to speed up fraud detection systems, banks can better adapt to their clients’ evolving risk behavior. It also helps minimize small acts of wrongdoing by employees or clients that slip through the net. Most importantly, it reduces operational costs by preventing costly and time-consuming investigations that can take months or even years to complete. 

Aspect #5: Targeted marketing and sales

As in any industry, data-driven marketing and sales are becoming huge in banking. By optimizing their brand communications based on customer information, bank marketing departments can use customer data to predict their needs, desires, and future behaviors. 

The gained insights help them develop personalized marketing strategies for the highest possible return on investment. Moreover, they can make more informed decisions about marketing campaigns and sales channels with the right data analytics.  

The bottom line

The ongoing technological advancements profoundly affect every aspect of banking: operational costs, staffing strategies, customer experience, and more. As a result, financial providers can offer better services through intelligent data, improve their efficiency, and ultimately increase profitability. 

Moreover, the improved use of analytics software has upgraded the way data is processed, making it possible for banks to identify trends and patterns and bring better business decisions at scale.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.