The Benefits And Dangers Of Big Data
Financial firms and other large organisations are finding that they need to process massive amounts of data. However, this move carries both benefits and risks and it is important to be aware of both.
Big Data, as it is known, is everywhere. It is found in mathematics, government, science and so on. The financial services industry uses it the most, however, and this is potentially also where the largest risks are. The idea around Big Data is being able to analyze and process huge amounts of data very quickly.
Is It Too Fast?
Financial exchanges benefit tremendously from being able to convey information as quickly as possible.
Different markets all over the world want to be able to process information in real time. Dealing with Big Data is now so quick that certain companies are receiving fines just for being a few seconds late.
Because of the speed, the way data is collected and how decisions are made is changing too.
There are various new techniques that make it possible for trades to be executed without any human interaction, for instance.
Data from all over the world can automatically be gathered and analysed to predict future trends, whether that is on the stock exchange market, or in terms of weather patterns.
The Benefits of Big Data
There are a number of reasons why analysing Big Data is so important.
Data has always been used in order to predict trends. The difference here, however, is how much data can be analysed and how quickly. This means that, in theory at least, decision-making can be improved, directed at specific needs and demands.
It has always been known that knowledge is power. As such, information is now one of the most common commodities in the world.
Thanks to Big Data, companies are able to instantly identify the behaviour of their customers or shifts in the industry, and this can lead to more accurate decisions.
Big Data gathers information from everywhere. It simultaneously looks at customer feedback, trading patterns and social media channels, for instance.
This information can be very random, such as the fact that 90% of people who make a financial deposit of over $100,000 on a monthly basis also own dogs.
However, this information, as random as it may seem, also makes it easier to target new information towards those specific people. The same data shows, as well, that these people take risks when it comes to their investments, which is incredibly important to know for a financial institution.
Big Data allows companies to stay ahead of trends. A bank, for instance, is able to analyse their cash flow over certain periods of time and this can help them to make accurate forecasts over coming trends. It also allows banks to see the results of government program funding or regular employment trends, which we know change every five years. Finally, Big Data can help to make decisions using historical data as the denominator. For example, should a company decide to relocate elsewhere, this can impact their financial situation and their employee engagement significantly.
Because this is a known fact, Big Data can help companies to ensure their payment programs are in place to ensure all bills, including salaries, continue to be paid on time.
Big Data, as such, makes it possible to act on real-time events based on information from the past.
The Drawback of Big Data?
It cannot be denied that Big Data is hugely important in terms of segmenting customers and making decisions. However, there are some significant concerns as well, relating mainly to regulatory issues, security breaches and potential cost implications.
It is important to be aware of these issues before deciding whether the benefits of Big Data outweigh the drawbacks. Firstly, when so much information on customers is not just available but also segmented in various different patterns, a new risk could actually be created. If the information was lost or leaked, for instance, the effects could be catastrophic.
This is what happens when someone ends up leaving their laptop or USB memory stick at the back of a cab. Even though the information is often encrypted and secured, it is still accessible to a good computer expert, and people do not want their data to be out there in the public domain.
Regulatory issues are also important. Strict guidelines have been established on a federal level, in the US, about the storage of data and how long it can be kept.
However, there is a strong drive to reduce this period of time, so that risk also becomes lower. However, in the present scenario, if a company were to go bust and the information they held would get subpoenaed, then it is unclear who would be responsible for it. Finally, the cost is important too. It is unclear who decides how storage and management costs are calculated. However, the information has to be housed, it must be linked to the internet and people want to connect to it remotely in order for it to be beneficial. This brings security risks with it as well, but also a tremendous financial cost.