By Martin Arnold, Financial Times
London: Imagine if your bank sent you a financial health-check every morning, predicting how likely you were to go overdrawn that month. Or tracked the stores, cafés and restaurants where you spend money and sent discount offers.
Or if your investment adviser emailed offering to set up a mobile video call whenever your investment portfolio needed adjusting. These ideas may sound unrealistic to some bank customers who still wait days or even weeks for their cheques to clear. But as lenders start to harness the power of big data they are close to becoming reality for many consumers.
“Big data is a big opportunity, but we’ve got to sort a lot of things out along the way,” says Greg Baxter, global head of digital strategy at Citigroup. “But there are still a lot of ‘small data’ opportunities that can make a big difference — we’re trying to make managing financial health a more integrated part of our client’s life, so we’re experimenting with providing clients with early warnings of potential cash flow problems in their accounts, for example.”
While most banks are enthusiastic about making the most of the data they hold about customers, they are held back by concerns over privacy and the technical challenges stemming from their ageing and complex systems.
As an example of an area that raises privacy issues, Baxter says banks could use information available about people on social media — such as who is in their circle of contacts — to decide whether to grant them a loan. “We don’t use such data, and believe there is a lot to be understood about the consequences of using that sort of data in making decisions that could have important consequences in people’s lives,” he says.
Anne MacRae, managing director of financial services at Fujitsu, the IT services provider, says more than a third of banks still buy data on clients from third-parties, because it is too hard to extract the same data from their own systems. “Banks have been very good at rolling out digital services at the front-end, like mobile apps, but they haven’t done so well in the back-office, which is still largely paper based for mortgages and loans,” she says.
The trend for banks to jump on the big data bandwagon started in the consumer banking space. In the UK, Santander and Lloyds Banking Group are among the lenders teaming up with retailers to offer personalised discounts to customers through their mobile applications based on an individual’s spending patterns.
But now they are examining the possibilities in other areas, such as wealth management and corporate banking.
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