BBVA, which between 2011 and 2013 spent an average of €850 million a year investing in technology, infrastructure and software development, is an example of the way finance institutions are beginning to bank on big data.
“Banks are starting to realise the full potential of digital technologies and their potential to disrupt and transform the banking industry,” says Richard Lumb, group chief executive for financial services at Accenture, the consultancy.
The big data boom in finance has started to bring new job opportunity at banks. “Demand for big data experts is strong,” says Adam Jackson, managing director at leading City of London recruiter Astbury Marsden.
He says this has become an important focus as more data exchange with consumers is conducted via the cloud.
But there is a skills shortage of analytics talent across the financial services industry, according to Accenture. Technology is becoming increasingly important for banks and they are battling technology groups for the best talent.
All industries are scrambling to figure out ways to harness the power of data, which they are using to drive decision making. Finance is one sector that has been ahead of the curve. “I have seen both the insurance and financial services areas make the early moves,” says Michael Goul, chair for the Department of Information Systems at W. P. Carey School of Business.
Dustin Pusch, director of business analytics at George Washington University’s business school, says big data is becoming particularly important for banks’ credit departments.
“The use of big data is increasingly necessary for firms to be competitive,” he says.
While most banks are enthusiastic about making the most of their customer data, they are being held back by concerns over privacy and the technical challenges presented by their ageing and complex IT systems.
Fujitsu, the IT services provider, estimates that more than one-third of banks still buy data on clients from third parties, because it is difficult to extract the same data from their own systems.
“Any data on customers needs legal and security vetting,” says Professor Kalyan Talluri, director of the MSc in Business Analytics at Imperial College Business School.
They are also held back by a need to overhaul their cultures — utilizing data means changing the way a firm views decision making. “Managers need the ability to understand the assumptions and limitations behind the analytical insights presented to them,” says Arne Strauss, associate professor from the MSc Business Analytics at Warwick Business School.
The trend for banks to jump on the big data bandwagon began in the retail banking area. In the UK, Santander and Lloyds have partnered retailers to offer personalized discounts based on spending patterns to customers through their mobile apps.
But now banks are exploring opportunities in other areas, such as wealth management and corporate finance. “The advisory model whereby private bankers receive fees based on assets under management benefits from greater access to digital tools,” says Patrick Lecomte, executive director of the Advanced Master in Financial Techniques at ESSEC Business School.
Investment banks have been slower to embrace big data. But Goldman Sachs took the lead with a $15 million investment in data analytics start-up Kensho, while JPMorgan Chase last month launched a big data venture to map the US economy.
Big banks are investing more in their data but digital, programming and development skills are in demand from a broader range of financial services firms, says Paul Schoonenberg, head of MBA careers at Aston Business School.
“Information technology was historically seen as a cost on the business of banking. But that has changed significantly as the digital revolution continues to take hold,” he says.
Martyn Drage, career consultant at Henley Business School, says private equity firms want people who understand financial analytics and who can “crunch the numbers”.
“Most established [private equity] firms will have levels of intakes specifically for MBAs,” he adds.
Many data initiatives are a long way from coming to fruition. But as financial institutions begin to bank on big data, analytics skills will become a more valuable asset.
Tony Somers, director of the Career Management Centre at the business school HEC Paris, believes that hiring at the crux of finance and technology will become a recruitment trend. “I am not seeing it yet, but it will happen,” he says.