Big Data in Commercial and Retail Banking

Commercial banking’s next big opportunity might be in Big Data as it should be able to improve current risk management and fraud detection techniques as well as improve marketing and customer loyalty.

Before explaining how, it is important to understand what is meant by ‘big data.’ Although there are several definitions of the term, the most widely used definition – the one we discussed in class – describes big data by the 3Vs:

Volume-A large quantity; terabytes

Variety – Data that measures social and behavioral practices.

Velocity – Which means near or real time assimilation

Big Data is becoming increasingly important for all types of business to use. However, the utilization of Big Data has the potential to cause major distribution in the retail banking space if executed correctly.

Risk Management/Fraud detection – With the increasing amount of personal information being given up by people, identity security is becoming a larger problem. However, Big Data may be able to solve this problem in banking. Enhanced algorithms can be enacted to track changes in behavior “beyond what is happening in a client’s credit card account.” This would amount to reduced risk, and allow appropriate intervention when necessary.

Marketing and targeting – With the use of Big Data, banks could “provide the insights to develop segmentation strategies based on transactional, behavioral and even social profiles.” This would allow for more personalized attention and a greater customer experience.

Just like many the Internet’s Fantastic Four (Google, Amazon, Facebook, Apple), have been using Big Data to look for purchasing patterns of users, it is time businesses – specifically retail banks do the same, as not doing so may not be an option.

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2 Responses to Big Data in Commercial and Retail Banking

  1. clairejwiggins says:

    Definitely banking should be getting on board with the big data revolution, as most large infrastructures should at this point in time, because as you say, “doing so may not be an option”. I can see how taking advantage of big data could really help improve their business by improving customer relationships and therefor saving money. If the data was examined, the financial process could be safer if it was under tighter survalence, hopefully preventing fraud, etc. How could marking/targeting be improved, specifically though? And how would the banks access personal information of its customers, and what problems would go along with that?

  2. jayraina says:

    Banks have an ability to monitor what consumers purchase very closely, as many times when a consumer makes a purchase on a debit/credit card, the bank can tell what type of purchase it is. On a side note, if you’ve used you can see what I’m talking about where it’s very easy to be able to tell what type of purchases a consumer makes.
    This could help marketing depending on what consumers purchase.

    In my opinion, giving banks access to personal information isn’t that big of an issue, as even as they are today, they have a lot of our personal identification and financial information.

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