A peek into the discussions at SIBOS 2013, the largest conference of the financial industry, which recently concluded in Dubai, offers a clear testimony to the fact that big data is becoming vital to the financial industry. From risk management to fraud detection to analytics and developing standards, banks discussed the opportunities and challenges big data presents today.
Information based decision making is not a new phenomenon. Then why has big data gained momentum in the last few years? With the growth of new technologies and computing skills, financial institutions have amassed huge amounts of data. On the other side, the emergence of social media, mobile devices and other gadgets coupled with increasing internet usage has led to the rise of unstructured data. Financial institutions recognise that they are sitting on a vast amount of complex, disparate information called big data, capable of giving new insights into the market as well as their clients. Firms collect terabytes of information into their systems as well, everyday, ranging from transactional data, customer details, demographics, market feeds etc. Financial institutions have started to understand the power of this data to drive business.
Gaining Edge, Gaining Insights
The exponential and unprecedented rate at which databases are growing presents opportunities for asset managers to provide guidance to investors for selecting portfolios which will generate good income and help them achieve appreciable capital gain. The current economic environment too necessitates the need for greater transparency and information. Asset managers today realise that it is too risky to make decisions based on small sample sub-sets of data. In the days before the concept of big data evolved and when data be analysed due its size and nature, modelling was used heavily and one of reasons for the 2008 crash is use of wrong models based on small sets of data/wrong data.
For asset managers, big data is all about getting a complete and transparent view into the investment world. Inside those terabytes of data lies the key to customer preferences, red flags to risk exposures and ideas for new portfolios. By delving into data from both internal and external sources, asset managers can analyse market risks and provide insights to clients to select the optimal mix of portfolio. Asset management firms hold large amount of historical data in machine-readable form. Analysis of such data for the purpose of abstracting and understanding the market behaviour and using the abstractions to predict performance of the portfolio is gaining traction. The real power of big data lies in its predictive capabilities.
Technology – The Big Challenge
While the big data is proving to be a boon, it has also brought with it few challenges, such as that of storing, managing and analysing data, which is quite heavy. Firms need solutions that can turn big data can be into smart data, thereby help churn out new products and portfolios and give them a competitive advantage. Traditional relational databases and grid-based computing are not capable of handling very large volume of data sets.
Analysing big data needs technology that can process complex events and convert traditional, unstructured data into a structured format to perform analytics. Firms should focus on implementing strategies to enrich data to achieve larger business objectives across all functions. These strategies could enhance reporting and analytical capabilities, such as the use of data to test risk and investment assumptions, and to explore predictive scenarios built around various decision paths.
Today many new technologies have emerged which can help organisations to harness the power of big data. Open source platforms like Hadoop can help store huge amounts of data in a cost effective manner as well as retrieve it for analytical purposes. Organisations can thus utilise and manage huge volumes of data deep within the bowels of its IT infrastructure. Together with a new set of cloud-based portfolio analytics solutions like StatPro Revolution, asset managers can turn big data into smart data, which can help them understand market trends and behaviour and make informed decisions.
A major hurdle to the usability of big data for asset managers is to get all the relevant information regarding their portfolio at one place. Dashboards are emerging as a sought after feature in big data analytical tools. These can give both portfolio managers and clients a complete view of their portfolio with relevant information visually represented.
Tomorrow, big data management will evolve into an integrated series of operations that begins with transactional processing and work ﬂow, exceptions monitoring, data management and data-rich dashboards.
Big data technology implementation comes at its own cost. But for asset management companies the 3 V’s of data –volume, velocity and variety is equally important to make informed decisions. Hence firms are looking at technologies which can help them store, manage and process data to stay competitive and ensure complete return of investment for their clients.
What are your thoughts on the future of big data?