You are on page 1of 12

www.ikanow.

com

FINANCIAL DATA: THE NEW STANDARD CURRENCY OF OUR ECONOMY


Malcolm X would have been great at financial data analysis. Amongst many other important things, he encapsulated an incredibly important idea when he said: The future belongs to those who prepare for it today.

How can financial data help us prepare for the future?


Financial data can benefit anyone from the corner coffee shop all the way up to your friendly neighborhood multi-national conglomerate. From looking at transaction patterns to market trends, any business can understand their customers behavior and risk to make important decisions with a properly-analyzed pool of financial data.

Stop and smell the roses


The problem is that things move so quickly and change so frequently that many businesses and financial institutions simply 1) dont try or 2) give up after an unsuccessful start. The ones who do tap into financial data and gain valuable insight are essentially building a cornerstone for their futures. Its complicated, but the juice is well worth the squeeze. Think of financial data as a giant garden of insight with unimaginable potential for anyone who is willing to stop and smell the roses.

www.ikanow.com

Simplify financial data analysis


I know what youre thinking. Yes, our financial institutions and businesses have been using data to gain insights and to determine risk factors seemingly since the dawn of time. However, I think we can all agree that the 2008 mortgage crisis and the 2009 global financial crisis have proven that our existing techniques are not enough to handle our nations financial system challenges. Our financial institutions shouldnt have to suffer because we didnt crunch enough insight from available data. We need to keep crunching financial data, and we need to crunch it the right way. Thats why Ikanow is taking the time throughout the next couple of weeks to share a series of posts on financial data analysis here on this blog.

ITS GONE! HOW TO HIT A HOME RUN WITH FINANCIAL DATA ANALYTICS
These days, it seems like every financial institution is operating as if theyre up to bat in the bottom of the ninth inning with two outs. Crunch time is now all the time. We at Ikanow want to give them more strength at the plate.

Whos on first?
Lending money carries risks not only for the borrower but also for the company or individual that is supplying the funds. While there are existing checks and legislation to try and minimize the risks to both parties, things can and do still go wrong. You only have to look back to the mortgage crisis in the US; in January 2010 there were over seven million mortgage holders who were at least 30 days behind in their mortgage, with many experiencing foreclosure.

www.ikanow.com

Having access to as much financial data as possible when making lending decisions is a must; but, it is as essential to know how to analyze the data and to know how to apply what you have learned. Financial data analytics is not for the faint-hearted. Using the right tools and connecting with the right data is essential for hitting one out of the park.

What we mean by financial data analytics


Ikanow sees financial data analytics as the process of collecting, analyzing and understanding as much information about people, businesses or organizations as possible and structuring that data in order to create actionable intelligence. It involves accessing data from a range of sources and being able to collate it into a manageable form. It can involve checking for name changes, different spellings of names and where necessary translations; all to ensure that you have access to everything available on an individual or group. It can also include spending patterns and behaviors, types and amounts of investments and patterns of work and earnings.

Why you need financial data analytics


As long as you know how to collate and read the data that is collected, you can develop a clear picture of risk and reward. By doing this, you can create actionable intelligence for you to guide your business in the right direction. As well as identifying risk, financial data analysis can help institutions understand their customers and meet

www.ikanow.com

their individual needs better. It can also assist in improving customer confidence in the financial industry; essential as it remains at an all time low. Edelman, a public relations firm in the US, found that less than half of Americans trust any financial services. This is compared to an astounding 83% who have full trust in the technology sector. As financial data analytics involve using computer software to track digital footprints, among other things, peoples faith in technology can be harnessed to return their faith in financial institutions.

Whos your clean-up batter?


At first glance, it can be difficult to see why using an external company or software to gather data on clients can help to improve their faith in the financial system, especially with growing concerns over identity theft. However, by accessing experts in financial data analytics you can make more effective decisions quicker. This, in turn, means that clients get feedback quicker and in the knowledge that their data has been handled fairly and securely by someone who has no vested interest in the outcome, other than ensuring that they have provided a high quality service. The benefits do not stop there, by using an expert you can save time and money, as well. This way, you not only free up additional time to deal with more clients, but can also pass on savings to those same clients. Happy clients are likely to reuse your service and recommend you to others.

www.ikanow.com

How to pick your team


If you are considering using experts in big data, to undertake your financial data analytics, you need to choose the right experts for you. You need to choose a company who can address the needs of your organization and the clients that you represent. If you are a small lending company, focusing on house loans, you will be dealing with different clients, compared to a multinational, focusing on investing on behalf of clients. You will need to be able to access the information they provide and to do so securely. It will need to be provided in a form that you can use and easily translate into a decision for your client. Youll also need the right big data software solution to help you cover all of your bases.

Your next swing


In a time of continuing financial uncertainty, financial institutions need to do everything they can, to minimize risk, uphold financial legislation, and improve consumer confidence in the financial sector. Information is an indispensable element of achieving these aims, however, information by itself is not enough. Once gathered it needs to be analyzed and understood in order to be used effectively. By using an expert in big data, to collect, collate, and analyze customer data for your company, you can help to improve the service you provide while minimizing the risks to your company and the industry as a whole. When your company needs a big data solution and youre up to bat, we want to help you hit one out of the park.

www.ikanow.com

FOUR FINANCIAL DATA ANALYSIS LESSONS FROM LAS VEGAS


You may not think that a Las Vegas casino would be the place to learn a lesson on data management and processing, but it is actually one of the most visible symbols of how data can be efficiently processed and turned into a working business model that recorded gross revenues of $6.2 billion in 2012. Las Vegas casinos use many of the same modeling techniques with their data as you would find in a system that featured financial data analytics. The key to drawing the correlation between the two is to understand both how the data is processed, and what is done with it afterwards.

1. Know your members


For a casino, data can come from a variety of different sources, but one of the biggest sources of data comes from rewards programs which can be found in just about every casino in Las Vegas. Each consumer can be thought of as a single entity, much the same way a financial analyst may focus on a single stock. Casinos use their rewards program as the mechanism to obtain a plethora of information about each customer who signs up for it. In much the same way, a financial data analytics tool can be used in order to get quite a bit of information about a single stock, fund, or other financial vehicle. Some general information gathered from the rewards program like date of birth, gender, and place of residence may not seem like much on the surface, it actually starts to paint a picture of which specific customers the casino would most likely see a high rate of return on if they marketed towards them. According to the American Gaming Association, more men visit casinos than women, and the average age of a casino patron is older than the average population age of people 21+. An analyst looking to spend their money wisely for the best rate of return could start grouping stocks into categories which the data may show will have a better chance of having a high rate of return.

www.ikanow.com

2. Look for patterns


More detailed knowledge about a patron can be gleaned from watching what they play. If a certain individual is spending and losing thousands at a slot machine, which will generally carry a high house edge, that casino would make a strong play to get that customers return business, giving them free hotel stays, or assigning them a host. Armed with this information, the casino is going to see a positive rate of return an average by giving them something for free, basically like investing in them. In much the same way, a fund or loan manager that can get the data necessary to make a similar call with a particular loan, stock, or commodity can expect to see a positive return on their investment as well, since the risk, inherent with any kind of investment or loan, will be negated greatly.

3. Build for success


In any portfolio, there will be assets that rise and value and assets that drop in value from year to year. A good fund manager can use financial data analytics to increase their position in the top performing investments, while scaling back their position in assets that arent doing as well. Casinos do something very similar with the data they gather dealing with the layout of the facility. Think about the last time you were in a casino, you walk onto the gaming floor and what is all around you? Most of the time, you will be surrounded by slot machines. Casinos have figured out that a player who wants to play one specific game will walk to wherever that game is in the casino. On the other hand, customers who just want to start playing something right away are more likely to head to what is closest to them.

www.ikanow.com

4. Adjust your investments accordingly


By setting up slot machines, by far the most profitable part of any casino, accounting for nearly 70% of profits, near the entrance, people looking to sit down and gamble will be doing so at a game where the house edge is anywhere between 2-15%. The casinos have effectively increased their position in the most profitable asset in their portfolio, by analyzing and acting on the data presented to them. At the same time, they put their least profitable games, generally table games like blackjack and poker, either in the back, or somewhere that is convenient for them. You can use financial data analytics to do basically the same thing. If the data you gather shows that a proven earner looks to keep increasing in value, you can adjust your investments accordingly, taking some from the weaker assets and assigning it to the stronger ones.

Your best bet for financial data analysis


Building a financial data analysis system can be a difficult task, but with the right team and the right assets, anybody can win big. Ikanow provides an open source analytics platform that allows users to organize, enrich and harvest data to create actionable intelligence for their financial employers and clients.

Financial Data Analytics: Investing in Actionable Intelligence


Over the past few years, financial data analytics has gone through a rapid period of transformation. The data that was used in the 1990s comprises only a small portion of the data that financial firms use today. This explosion in new data has created new processes to analyze that data. As a result of this growth and change, new opportunities have opened up in the financial sector. Taking advantage of these opportunities, however, has been a continual challenge. In the world of data science, this increase in data has created what is known as big data. In contrast to data from the 1990s, big data has exponentially more data. Some of this data is structured, and some is

www.ikanow.com

unstructured. In order to gain a competitive advantage in the financial sector, firms must develop financial data analytics solutions that process this data virtually instantaneously. The sheer quantity and various types of data, as well as the need to process it quickly, all pose unique challenges for financial firms.

Housing Big Data


Over the past decade, firms have invested heavily in IT infrastructure to house the growing amount of financial data. In the coming years, businesses will have to continue to invest in storage solutions for financial data. Few financial firms, though, have the resources to construct and maintain data centers large enough to house all the market, customer, governmental and corporate information they are responsible for. Most firms either outsource this entirely or bring in an IT consultant to help create a storage solution for all their financial data.

Guarding Big Data


By nature, big data has different types of information: structured and unstructured, as well as confidential and non-confidential. Businesses in every sector must deal with these differences, but companies in the financial industry face greater consequences if they fail to properly handle their data. Leaked information can lead to lawsuits, fines and (in severe cases where criminal intent is shown) imprisonment. The location where files are stored must be protected from physical harm, as well as digital harm.

Processing Big Data


All the information in the world is only useful if it can be processed. In the financial industry, information is only useful if it is processed instantaneously. Over the past 10 or 15 years, as the prevalence of electronic trading has grown, the financial markets have been accelerated. Because almost all trading is done electronically now, split-second decisions must be made. Even a momentary delay in a financial data analytics system, one that lasts no more than a fraction of a second, might have a significant negative impact.

www.ikanow.com

10

In todays world, financial data analytics is only useful if it has an ultra-low low latency. Essentially, it must be live. Regarding infrastructure, firms must have the infrastructure in place to process big data at an extremely high velocity. The need for instantaneous information also has implications for software. Any financial data analytics software must be built to the highest standards, so that it can process all the data a firm has instantaneously. The programming should be as efficient as possible, so computers can run the software quickly. The interface should be as simple as possible (while still providing all the necessary information), so people can use the software quickly. Any big data analytics program that companies in the financial sector rely on must be able to merge structured and unstructured data quickly and in a format that users can easily understand. Information from Oracle, Microsoft Office and XML needs to be complemented by data from social media. Any software used should be able to present different types of data quickly and in flexible formats, so users can manipulate it as needed. Users should not have to waste type reformatting their data or searching for the right information. The analytics software should take care of that work for them.

A Scalable Solution
Finally, any financial data analytics solution that a firm decides to implement must be scalable. This may be obvious for growing small- and mid-sized companies that cannot afford the upfront costs of a large-scale solution. Even the most well-established, large businesses in the financial sector need a scalable solution, though.

www.ikanow.com

11

The solution developed should be scalable. It must be able to grow as big data continues to grow. This field has emerged in the past decade, but it is on track to continue growing in the coming years. Anything implemented today must be upgradeable for next year. Hardware will need to be upgraded in the future, but the ability to grow is especially important for software. A program should be continually developed, and it should be built so that its files will be compatible with future software programs.

aboUT ikanoW
Ikanows founders created the company in 2011 in response to personal observations while working with the Department of Defense and Intelligence Community regarding the challenges of information unification. The founders believe new ways of thought were required to solve complicated data and information. They believed that analysis solutions required focusing on processes and tools, specifically open-source tools, which will become the primary means for businesses to solve their structured and unstructured document analysis challenges.

Request quote

Request Demo

www.ikanow.com

12

You might also like