Big Data is becoming a very powerful tool for many industries from Healthcare to Retail to Financial Services. In the last 15 years or so, the number of devices on the internet has exponentially increased and all these devices are collecting and storing data. Storage capacity is increasing and becoming much cheaper. This information is stored in a database and companies have the ability to massage the data in to a format that allows them to make decisions on how to run their business. The financial industry is doing an incredible job at using Big Data to their benefit by improving customer service, reducing risk and meeting compliance objectives.
Big Data is being used to detect fraudulent charges by “learning” the behavior of the customer by collecting data on previous shopping habits. If the bank notices that, you make a purchase in Philadelphia, PA in the morning and then your card is used in San Diego, CA 30 minutes later they will likely put a hold on the transaction. They know that it is not realistic to travel from one end to the county to the other in 30 minutes. Now this could be a legitimate scenario as some families share accounts and have duplicate cards but if you do not notify them in advance you or your family members may be inconvenienced until this is cleared with the bank.
Banks are reviewing spending habits, account balances, and other data to improve their marketing campaigns. They categorized each of your purchases and if they determine you are spending money on student loans you may start to see flyers for consolidating your loans with them or they may try to get your business on your next student loan. They will review your income and account balances to offer special deals. If you have over $10k in savings, you may start to see promotions for high yield saving accounts or brokerage accounts.
Credit reporting agencies supply banks information on your credit reports. If they notice that, you have a low score they will consider you a high risk. If you apply for a loan, they will raise your interest rate to compensate for the risk or decide not to offer the loan. This can work in or favor as well. If you have a high credit score, you will get a better interest rate.
These are just a few of the more common scenarios in which the financial industry is using Big Data. They along with many other industries are really just getting started. It is both exciting and scary at the same time but only time will tell how far this goes.