The finance industry is positioned to benefit very strongly from Big Data. With the rise of highly performant commodity hardware, big data solutions such as Google`s Hadoop, H-Base, Pig, Hive, Mahout or Couchbase, the question of overcoming the technical barriers of big data storage and processing seems to be solved.
Customer profiling and targeted offer improvement requires careful analysis of each customer`s journey from being a prospect to becoming a customer. Understanding where the customer comes from before visiting a bank’s homepage, Facebook presence or downloading its banking app (e.g. previous visited URLs) means identifying the touch points of her journey and indirectly understanding how customers` preferences and needs are being shaped. Social media channels, forums, Q&A platforms, comparison sites have become highly relevant touch points throughout the customer`s journey, since this is where the single customer journey within the web starts.
All this means that significant investments have to be made in the technical infrastructure in order to cope with huge amounts of unstructured data. Yet, the biggest barriers to success are not related to high costs of data management but how to address privacy in Big Data systems while complying with regulatory requirements. Today there is probably no other industry under more public scrutiny than the banking industry. Big Data poses a lot of questions with regard to privacy and regulatory issues. For instance, Germany and other EU countries enforce strict privacy laws that require corporations to inform any individual about all the data which is on record about her and delete the data if this individual wishes so. On top of it, personal data can only be stored with the explicit prior consent of individuals.
However, a merely legal and regulatory perspective is not sufficient. The biggest challenge is the potential threat to a bank’s reputation when clients and the public in general perceive it as secretly spying on their lives.
Above and beyond complying with existing regulation, there is one important thing that banks need to do: being transparent about Big Data. Clients and users of the digital and social platforms of a bank should be informed in no uncertain words what the Big Data strategy of a bank is all about, how this benefits clients and users, how privacy is addressed, and how risks are monitored and managed (just think hacker attacks!). Only openness and full transparency will bring acceptance to banks’ Big Data. Big Data should not be perceived as a bad black box. It can be a win-win-game for both, financial firms and their clients. Get this message out.