Powerful analytical tools help CUs extract actionable trends from mountains of data.
Big data is affecting almost everything.
It’s not unique to the financial services industry. Every industry from health care to professional sports is getting a facelift, thanks to the careful parsing of ever-growing mountains of data.SIDEBAR:
Big data is the term used to describe data sets so large and complex that it’s difficult to process using traditional database-management tools. With the right tools, however, organizations can discern critical business trends that will enlighten their growth strategies.
Part of the challenge of managing big data is its exponential growth rate.
About 90% of the world’s data today was developed in the past two years, according to IBM. Computer scientists now measure this data not just in megabytes and gigabytes, but in exabytes and zettabytes.
It’s difficult to comprehend the speed at which the world’s data is growing. Consider that:
The key to understanding and using big data to your advantage is to think of it as a tool.
When technologists and futurists say big data is changing everything, they really mean big data processes are changing everything.
“You shouldn’t care about ‘big data’; you should care about what it can do in your existing business projects,” says Vivek Bajaj, IBM’s director of global banking and financial markets.
Credit unions are putting big data to use in a number of different ways:
Big data means searching for patterns in massive data sets and using software to parse the information into something useable, according to Philipp Kallerhoff, author of “Big Data and Credit Unions: Machine Learning in Member Transactions,” published by the Filene Research Institute.
In his Filene white paper, Kallerhoff explains credit unions can use big data to improve:
NEXT: 'Big' marketing
Financial institutions are using big data primarily to gain insight into consumer behaviors and preferences.
While some institutions use big data for operational efficiency, risk and financial management, new business models, or better employee collaboration, the primary use of big data is consumer insight, especially for marketing purposes.
As tools for analyzing big data evolve, financial institutions are gaining insight into the financial behaviors of individual consumers. This has led some marketers to start thinking beyond the traditional marketing practice of segmentation— dividing target markets into subsets of members who have common needs—and then designing strategies to reach each subset.
“Nobody wants to be treated like a segment,” says IBM’s Bajaj.
The information extracted from big data, however, can result in more meaningful member engagement, which reduces the chance that members will become irritated by too many irrelevant or redundant marketing messages.
The consolidation of internal data (such as a member’s question to a member service rep) and the expansion of external ones (such as social media posts) can help credit unions create more personal experiences for members.
“It’s not about making more offers; it’s about making better offers,” Bajaj says. “Sometimes, ‘less is more.’”
In many ways, big data tools and processes are a refinement of what many businesses already are doing.
That’s certainly the case with market research, where credit unions already are trying to understand their members and potential members better. Big data analysis, however, can help them dig even deeper.
One way financial institutions are gaining a competitive advantage is by analyzing social media, says Jehan Hamedi, Crimson Hexagon’s global market development manager. The firm offers its clients software for monitoring and analyzing social media conversations—tweets, status updates, YouTube videos, and blogs.
Crimson Hexagon’s clients can tap into online conversations to see consumer opinions about their company and its products, services, and competitors.
“Social media analysis is compelling because the conversations are occurring on such a massive scale,” says Hamedi.
Mining social media conversations helps credit unions learn more about consumer expectations and motivations. This information can influence product and service design, pricing, and marketing, which strengthens your position in your marketplace.
It’s not necessarily a replacement, however, for traditional market research techniques, Hamedi says. Traditional techniques such as focus groups can reveal group insights that you might not get via individual interviews or social media posts.
Social media research and other more traditional techniques should be thought of as complementary, Hamedi suggests. ‘
Google, Facebook, and Amazon have led the big data charge. It’s not a big business—it’s a huge business—for these online giants.
While credit unions don’t have the same resources available to them, advances in data storage and analysis software are putting them in the game.
And third-party firms are lining up to offer big data solutions to help. The market is increasing at more than 30% a year and could reach $24 billion by 2016, according to a forecast by researchers at IDC.
Conceptualizing big data and what it can do for your credit union is a big task, but IBM’s Bajaj assures credit unions they’ll see tangible results if they do. “Big data is not a leap of faith,” he says.
He offers these five steps for getting started:
“It’s not a matter of whether or not to undertake big data initiatives,” says Bajaj. “It’s more about where to start.”