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The Value of Data in A Scaling Fintech - Optimus Fintech

The secret to success for a scaling fintech isn’t how much data they can pull in. Instead, it’s whether they’re getting the maximum value from it.

Brian Rambui

Nov 12, 2022

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According to a Forbes study, it is estimated that we create 2.5 quintillion bytes of data every day.

As technology becomes an integral part of our everyday lives, businesses have unprecedented access to incredible volumes of customer data.

Whether it’s analyzing financial transactions to offer budgeting tips or using browser cookies to create personalized online experiences, companies of all shapes and sizes are discovering the power of data and payment analytics.

Among financial entities, fintechs have been at the forefront of leveraging that power to progress.

So, what is it that makes data analytics so worthwhile for fintechs? What are the applications of data in fintech, and how can you create personalized customer experiences?

According to leading data scientists, the value data can be encapsulated in 4 V’s:

  • Volume is mirrored by the massive mounds of consumer data generated daily. Fintechs can collect, process, analyze, and filter enormous troves of data with the help of sophisticated algorithms. This can help them infer meaningful insights about customer preferences and behavior.

  • Variety comes from manifold text messages, audio, video, online activities, GPS data, online activities, sensors, etc. Advanced analytics tools then arrange this fragmented info into structured bytes through a highly organized, predetermined format that’s easier to use.

  • Velocity refers to how colossal data dumps are generated and processed at an exponential speed thanks to advanced analytics systems, making them usable.

  • Veracity (or correct facts) involves both the availability and quality of data. Variety or mammoth mounds of info can raise doubts about the data quality, making the data sources seem dubious. The data sources that are smaller in quantity and variety could give fintechs more control over such data, leading to more veracity or accuracy.

The Value of Data in a Scaling Fintech

New-age fintechs have been exploiting the benefits of data to predict consumer behavior and then develop complex risk assessments, which sets them apart from established financial institutions.

By processing vast data sets at tremendous speed, fintechs are well-placed for creating bespoke customer experiences and faster decision-making. They’re consistently able to spot and solve new problem areas for the customer.

The better a business understands its customers, the better it can serve them with relevant solutions.

Mo’ Data, Mo’ Problems?

The secret to success for a scaling fintech isn’t how much data they can pull in. Instead, it’s whether they’re getting the maximum value from it.

Transaction reconciliation is a common challenge fintech companies face, and considering firmer regulatory demands, it’s now a top priority, much like product launches and customer acquisition.

With their current systems and processes, many fintech firms find the amount and complexity of data they have to handle unmanageable. Thousands of fintechs still input, transform, reconcile and enrich data manually.

Data omissions and errors can lead to slower time-to-market, wasteful and unagile operations, financial loss and harm to a firm’s reputation. On the contrary, handling data more accurately and quickly makes a business more efficient, leaner, more transparent, and more competitive.

Building in-house reconciliation tools can be a solution, but this is expensive, labor-intensive, and time-consuming.

An easier way is to automate end-to-end management of financial data. No-code tools free your employees up from mindless, meaningless tasks and let them focus on important things that grow your business.

How Data Helps Fintechs

The global fintech market is projected to reach a market value of $324B by 2026.

Data, one of the driving forces of such growth, has core benefits for scaling fintechs -

  • Offering innovative products/services that appeal to a larger audience – By using data and analytics, fintech firms can understand consumer behavior and act on it accordingly. This way, they can make better-informed decisions about what products/services to offer.

  • Augmenting security – As fraud cases continue intensifying with the popularity of digital banking activities, fintechs are using data to develop robust fraud detection systems that can sense unusual transactions or activities before fraud occurs. Biometric and behavioristic authentication methods are made possible through large amounts of data.

  • Improved marketing – Data and analytics can help a scaling fintech understand which marketing strategies are working and which need to be altered or dropped altogether. By identifying customer segments and understanding their unique needs, a fintech can craft targeted marketing campaigns across various channels.

  • Improved operational efficiency – Taking appropriate action on collected data can improve the inherent mechanism of most workplace operations. Fintechs can use data analytics to find areas of inefficiency and enhance their operations accordingly.

  • Improved risk assessments – Fintechs can combine info from multiple sources to make sure no stone is left unturned. Better risk assessments let fintechs operate with more financial certainty, offer customers competitive rates, and manage cash flow.

  • Unparalleled customer service – Data helps fintechs create a digital log of a customer’s banking activity, detect potential errors and provide personalized support. Data and forecasting can also help them recommend the right products/services based on the individual spending behavior of their customers.

  • Determining customer lifetime value (CLV) – For fintechs to scale operations, they must sell more via new customer acquisitions. This needs to be done with reduced costs in view of the highly competitive market. With the rapidly evolving market dynamics, businesses must know their customer’s lifetime value (CLV), which lets them focus their efforts on the best clients.

Nowhere to Go but Up!

“The largest room in the world is the room for improvement.” – Anonymous.

Improvement, like change, often occurs whether we like it, plan it, or not.

As fintech continues to take over the world, more and more companies in fintech are exploring exciting applications of data to disrupt traditional institutions with a customer-orientated approach.

No-code is enhancing the performance of IT and operations, removing the burden on the former and empowering the latter. This opens the door to new innovations and benefits for consumers and businesses alike.

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