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.