The reason it’s so valuable is that it’s the most effective weapon in combatting the monopoly that the banks hold on the financial industry.
There are many ways fintech companies use data; we whittled them down to these four.
Knowledge is everything, and for small lenders, data can ensure they are savvier than the big banks. Realistically, they are not yet going to beat a bank in terms of size, profit or workforce but attaining data is the leveller that ensures they can compete. Once a small lender's foot is in the door, thanks to data, it allows their other qualities to come through, such as offering a friendlier service.
Data allows lenders to do predictive analytics (it’s a little dry, granted but hang in there) where they can work out more realistic, accurate borrowing terms that benefit customers with low-risk profiles.
Customer service and customer interaction are made better by data. Verticals across the country use data to ensure they know more about their customers, offering them a bespoke experience.
You’d probably think that customers wouldn’t be huge fans of businesses having their details on file. However, a report by Accenture found that customers would be willing to give their details away if it meant they’d have a better experience, especially if they’re looking to apply for loans.
Data is a good leveller. An abundance of data can ensure that a lender shows itself in the best light in its business plan because it has the best data. They are better able to offer their edge.
Since the entire global financial order went downhill around nine years ago, traditional finance firms have been reluctant to lend a hand to start-ups in the shape of capital. But with a solid, data-led business plan backing up a business' wishes, investment chances are far more likely.
More data means fewer places for an errant business to hide. More rigid compliance standards have been implemented since the banks went bust, which means internal audits and reports by companies need to be thorough. Big data allows businesses to do that, which reduces the risk that they’ll be penalised.
In a world increasingly run by computers, the cloud and other technologies, it's virtually impossible to see data not being the number one resource for the next few decades. This is the start of a new ‘age’; as it were, data will shake everything up, especially in the world of alternative lending. Are there other ways that big data helps businesses disrupt? Let us know what you think!
