Big Data

  • Big Data

How banks are leveraging big data and analytics to deliver new products for clients

Data analytics is changing the way banks do business – and creating new ways for them to add value for corporate clients. Dominik Schmidt-Kiefer, Divisional Board Member, Group Big Data & Advanced Analytics, discusses the practical considerations surrounding big data, and explains why it will play an increasingly central role in the way businesses interact with financial institutions.

In the modern economy, information has become a crucial resource, enabling the smooth functioning of markets across the globe. Each digital transaction generates financial information and in a world defined by electronic payments, banking has now become one of the world’s most data-intensive economic sectors.

Of course, financial data is by no means restricted to payments; trading, forecasting and risk calculations, for example, all involve and produce information. Big data – that is, quantities of information so vast that they can no longer be processed using traditional analytical tools – is now recognised by financial institutions (FIs) and corporates alike as a vital resource.

Data analytics means more efficiency and functionality for corporates

Dominik Schmidt-Kiefer, Divisional Board Member, Group Big Data & Advanced Analytics, Commerzbank AG

As banks collect these large quantities of data, they consequently have had to develop the analytical capability to put it to good use – improving both their internal processes and the services they are able to offer to clients. Data analytics allows legacy processes to be optimised or transformed altogether, rendering them less error-prone, time-consuming and labour-intensive.

This enables banks to better satisfy the needs of corporate clients, who naturally favour smooth and straightforward banking processes. Determining the creditworthiness of an individual or organisation, for example, used to be a cumbersome, paper-heavy undertaking. Today, artificial intelligence (AI) tools allow banks to generate comprehensive credit reports in seconds based on data provided by clients.

Data analytics also allows FIs to tailor their products to better suit client needs, supporting business retention in an increasingly competitive landscape. Insights provided by big data enable banks to better understand how a corporate client operates, revealing not only which services it may require, but also when it needs them. Using traditional tools, a relationship manager could find themselves offering a client a product days after it was needed. But with advanced analytics, the bank can discuss a specific solution with a corporate client weeks before it is needed.

Big data is becoming a crucial part of fraud detection

Aside from delivering timely solutions, banks can also offer clients increased peace of mind as big data is fast becoming a crucial part of fraud detection and anti-money laundering strategies. Machine learning – a subset of AI that uses statistical models to ‘learn’ and make independent predictions when applied to large quantities of information – is capable of detecting suspicious patterns of activity and helping to identify security breaches.

In cases where a transaction is suspected of being related to illicit behaviour, data analytics can help to establish other participants in the transaction. And big data’s applications are not just retrospective – it can be used to forecast potential problems and vulnerabilities, enabling organisations to get ahead of the curve when it comes to financial crime prevention and meet rapidly evolving compliance and regulatory requirements.

Corporates must view data as a business-critical resource

Big data is here to stay. As the economy becomes ever more digitalised – with our every online interaction recorded and a growing number of devices connected to the Internet of Things – those organisations with the capacity to understand and employ data effectively will have a competitive edge. Indeed, a host of smaller, more nimble digital finance providers have entered the market, often leveraging strong data analytics capabilities and innovative features to obtain an advantage.

But as financial data becomes a truly business-critical resource, corporates will continue to be discerning about who they trust with access to their information. This is where traditional banks, which for centuries have built a reputation as trusted guardians, have a unique proposition as custodians of what is fast becoming their clients’ most valuable asset.

Building the bank of the future

Big data, when converted into meaningful insights using analytical technology, can seemingly deliver an exciting range of benefits for both banks and corporates. But how are banks processing and interpreting such vast reams of unstructured information? To develop the necessary analytical capabilities, financial institutions are making significant investments, venturing outside their comfort zone to build competencies that lie beyond traditional banking activities.

Commerzbank, for example, is an active proponent of cloud technology – an essential tool for the effective storage and management of data. In January 2021, the Bank became one of the founding members of the European Cloud User Coalition (ECUC) – an alliance to promote the standardisation of practices and technical requirements for cloud users and service providers across the European single market.