Big Data is big business – and South African banks are getting on board to reap the rewards of the granular information about their customers, afforded to them by the data revolution.

Big Data has implications in terms of tracking fraud, understanding of customer behavior and even marketing, but it doesn’t come without its own set of pitfalls. Essentially, Big Data came is a result of new ways of processing and applying knowledge gleaned from data. Banks can now track transactions, real-time market feeds, customer service records, location data, and even social media posts to help learn more about their customers. In the traditional sense, a database was only as clever as the programmer who wrote the code that produced the reports. Modern advances, including allowing unstructured data sources from a host of channels to be checked in parallel streams across multiple servers, has made data processing cheaper, faster and more flexible than ever before.

Consumer Security

While Big Data processing has multiple positive implications for banks, there is also a concern from the consumer side about the security of their information – and the way in which it is used. Nirshan Harryparshad, Chief Information Officer: FNB Data Warehouse and Support Services, says that the limits on the data lifecycle and ownership are, in fact, quite precise – and legislated by POPI (the Protection of Personal Information Act) and PCI (Payment Card Industry) compliance. “POPI and PCI govern who has access to data, how long the bank may store the data, what data needs to be encrypted and what purposes the data is used for,” he says.

EY’s Dan Higgins told The Banker that there is “a philosophical change as to what constitutes relevant data to be analysed, and there is a tooling change that is required to the traditional architectures to allow for more efficient processing of very diverse, higher volume and more loosely connected data”. Harryparshad concurs: “Given that the various scorecards within the bank (be it credit or fraud) as well as reporting requirements are constantly evolving, the data requirements evolve with that. There is a greater need for more granular assessment of data across larger timeframes and data sets. We are also starting to see the use of unstructured data, such as call logs, voice etc,” he says. “Architecturally, banks need to invest in technology that can support this business need. We need to provide the ability to churn large volumes of data in a much shorter period of time – and we are talking seconds to minutes, here. There is also a significant drive, across all industries, to start analysis and decision-making based on real-time data. This alone suggests the need for faster processing and more efficient design of data extraction, transformation and loads”.

Reporting

The Dodd-Frank reforms in the US have driven banks to embrace new methods of analyzing and reporting on the data they hold – something Harryparshad says that South African banks have been naturally cautious about. “I do believe that the South African banks have for some time now been disciplined around the granting of credit based on accurate affordability assessments, in light of the NCA,” he says. “In addition, the AML monitoring within the banks has been fairly strong. In order to achieve this, a bank must have easy access to a client’s comprehensive transactional and behavioural information”. Access to this level of information gives banks the opportunity to tailor offerings and marketing material to client needs like never before – one thing that isn’t regulated in South Africa. “Currently, there is no limit to what we can use for marketing purposes. One must remember that the bank must receive marketing consent from its client prior to marketing, though,” he says.

Harryparshad believes the customers will see the benefit to banks having access to this granular level of detail – particularly when it comes to tracking potentially fraudulent activity on their accounts. “Having access to real time data is beneficial to both the bank and the customer. To be in a position to access fraud on an account, access a client’s behaviour at an ATM, to suggest rewards partners as you purchase… Imagine if the bank could manage your budget on your behalf, real time, as you spend. Real time data leads to a better and more frequent conversation between the bank and its clients”.

Power Play

The increase in demand for processing power and analytics have massive companies like IBM working hard around the world to provide solutions, and Harryparshad says that South Africa is doing its level best to keep pace with global developments. “Looking at the global big data technology evolution, we are seeing new hardware and tool sets pop up much more frequently. South Africa as a country has yet to get onto the Big Data bus and, as such, we do lack the necessary skills. In saying that though, as more and more corporates start embracing Big Data technology, we will see this shortage reduce. FNB is currently investing in up-skilling its staff on such tools, technologies and methodologies,” he says.

Essentially, Big Data should help banks deliver better customer service. Understanding what customers need now, and being able to anticipate what they’ll need tomorrow, will build loyalty and help cater for them as individuals, rather than treating them as ‘market segments’.

*This article was originally published in Banker SA.