May 31, 2016 Phil Burgess
The rise of financial technology - fintech - is one of the biggest stories of the financial sector in recent years. In broad strokes, fintech's accelerating popularity and use is bad news for traditional banks - and great news for a huge range of businesses. A big part of the reason why fintech holds so much promise is thanks to its use of big data. More specifically, fintech companies like MicroBilt are able to transform big data into smart data - information that businesses can actually use in real time to make more strategic decisions and better protect their organizations.
Big data and fintech
Fintech is a very broad term, encompassing a wide range of companies and services. The one thing that all fintech efforts have in common is a focus on leveraging technology to improve finance.
Naturally, that ties into big data in many instances. After all, big data analytics is arguably the most significant technological development of the decade. IDC predicted that the big data technology and services market will experience a compound annual growth rate of 23.1 percent through 2019, when it will be worth $48.6 billion. Companies of all kinds are finding ways to gather the massive amounts of data that are now widely available and, through analytics, develop solutions that leverage previously unavailable degrees of insight.
So how exactly does big data fit into fintech? Here are two ways.
Instant bank verification and aggregation
One of the most powerful applications of big data analytics in the fintech space is instant bank verification and aggregation. In order to assess and manage risk, businesses of all kinds have a need to ensure that their prospective customers' banking status and history are both in order.
The more data that is evaluated during this verification, the more accurate the results will be. For example, Microbilt immediately analyzes transactional data from more than 15,000 financial institutions as part of its Instant Bank Verification offering. Using technology to deliver a financial service traditional banks can't match - that's fintech in a nutshell.
"KYC efforts need large amounts of data from diverse sources."
Another important use of big data in fintech is Know Your Customer (KYC). As we touched on in an earlier article, KYC is critical for businesses that need to protect themselves from the threats of identity theft and fraud - that is to say, just about any company. KYC solutions allow organizations to determine whether a potential customer is in fact who he or she claims to be, thereby protecting companies from liability and loss.
For KYC efforts to prove effective, they need to harness large amounts of data from diverse sources. The more effectively a fintech firm can leverage big data analytics to produce smart insight, the more accurate its KYC and risk assessment tools will be.
In these and other areas, fintech companies are using smart data to deliver invaluable insight to their clients. Those businesses that partner with and utilize such resources will enjoy not only significant protection, but also a major competitive advantage.