Financial analysts develop financial reports that serve as summary information for managers. They also identify relevant insights and compile analytical reports. This makes it easy for team members to make sound decisions.
Financial data analytics is applied to an organization’s performance in different ways. It’s used in developing organizational goals and objectives. Financial data analytics is also used in building dynamic profit and loss statements. It helps in speeding up month-end close to streamlining budgeting and forecasting.
Modern financial software solutions are coming up to address the changing roles of the CFO and the financial team. This way, they can access a full data set and quickly meet the demands for financial information.
It’s crucial to have a single source of truth when preparing reports in an organization. It enables stakeholders to interact with the same database. It also makes it easy for everyone to make consistent and accurate decisions.
Data Analyst Roles in Financial Sector
The role of data analysts in the financial sector is profound and the number of data analyst jobs is growing every other year. Data analysts use tools like machine learning and data analytics to minimize risks. The tools also enable them to create more efficient and profitable decisions.
Let’s now discuss some of the roles of data analysts in financial sectors.
1. Customer Data Management
Data has transformed how financial institutions function. The volume of data is generated through social media and a large number of transactions. Data in financial sector is available in two forms:
- Structured data
- Unstructured data
Whereas structured data is easy to handle, unstructured data causes a lot of challenges. NoSQL tools can be used to handle unstructured data and get it processed with the help of MapReduce.
Business intelligence is the most crucial aspect of data analytics. Organizations use machine learning to create insights about the clients and extract business intelligence. Artificial intelligence tools like Natural Language Processing and data mining help in generating meaningful insights.
Also, ML algorithms assist in analyzing financial trends and changes in market values. This gets done through an analysis of the customer data.
2. Provision of Personalized Services
Financial institutions are tasked with providing personalized services to their clients. They use techniques to analyze client information and create insights into their interactions.
Financial institutions rely on speech recognition and NLP-based software to improve interactivity with users.
With the data gathered from users, data analysts can take actionable insights into their client’s needs. This leads to increased profits. It helps the institutions to optimize strategies and offer better services.
3. Algorithmic Trading
This is the most important part of financial institutions. There are complicated mathematical formulas and lightning-speed computations in algorithmic trading. This enables data analysts to devise new trading strategies.
Data analytics has had an impact on algorithmic trading. Data science, on the other hand, has become its most important feature. The data in algorithmic trading is made up of massive data streams. It involves a model that measures and describes the underlying data streams.
The goal of the analytical engine is to make predictions for the future market. This is done by ensuring that there’s a better understanding of the massive datasets.
4. Fraud Detection
Cases of fraud are a major concern for the financial sector. The high number of transactions has caused an increase in fraudulent activities. With analytical tools, financial institutions can now keep track of frauds with the help of data analysts.
Credit card fraud is one of the most practiced frauds in financial institutions. The detection of this form of fraud is thanks to the improvement in algorithms. The improvements have increased the accuracy of anomaly detection.
The detections also alert institutions about anomalies in financial purchases. This prompts the institutions to block the accounts to minimize losses. Data analysts also use ML tools to identify unusual patterns in trading data.
4. Risk Analytics
This is one of the key areas of data analytics and business intelligence in finance. Risk analytics and management enable financial institutions to make strategic decisions. They increase trustworthiness and security in the institution. Unlike the traditional structured data, the more advanced form of data can’t be accommodated in spreadsheets.
There are different kinds of risks that an institution faces. The risks come from competitors, credits, and markets. In order to manage risks, data analysts need to monitor and prioritize them.
There is the availability of data from client information and financial transactions. As such, institutions need to train on this type of data to increase risk scoring models. It will also help to optimize costs. Verifying the creditworthiness of clients also helps in risk management.
6. Real-Time Analytics
Data processing in traditional analytics was in the form of batches. That’s to say that data processing was historical, not real-time. This caused challenges for organizations that needed real-time data.
With the evolution in technology, data pipelines can be accessed with minimal latency.
With the application of data analytics in finance, institutions can be able to track transactions. They are also able to track credit scores and other financial attributes without issues of latency.
7. Consumer Analytics
Consumer personification is a major responsibility for the financial sector. With the help of real-time analytics, data analysts can take insights from consumer behavior and make decisions. Course5’s Customer Journey Analytics improves customer experiences through an understanding of the moments that matter most to them.
Institutions like insurance companies use consumer analytics to measure the client’s lifetime value. They also use consumer analytics to increase their cross-sale and reduce the below-zero clients for optimizing losses.
There are many roles of data analysts in the financial sector. The use of data analysts is majorly in the field of risk management and analysis. Organizations also use data analysis for fraud detection to find anomalous transactions.
Data analysis is also used in algorithmic trading. Here, ML plays the key role in making predictions, especially about future markets.
The role of data analysts in finance is to gather analytical reports from insights. This enables these institutions to make better decisions. Additionally, analytics is important because an institution’s growth is based on the strategies made.