Big data represents one of the biggest technical trends, challenges and opportunities facing the data-central banking and financial services sector to which data and its manipulation and management are central. Generating business value from how actionable data is captured, stored, processed, analysed and utilised within the business including front, back and mid-offices remains a critical issue for industry executives wrestling with legacy IT systems, multiple and increasing data sources and operational silos.
For a sector working under continually increasing regulatory scrutiny and pressure, risk and the effective management of it is at the heart of how the sector operates on a daily, hourly or minute-by-minute basis. Risk management can involve responding to regulatory, political and technology challenges involving data, its capturing, storage, processing, analysis and visualisation.
Investment in financial-technology (Fintech) companies grew by 201% globally in 2014, compared to 63% growth in overall venture-capital investments1 and expectations for start-ups in this sector continue to grow. In 2014, more than $12bn was invested globally in this sector. At a UK level, start-ups were successful in raising $700m from investors between 2008 and 20132 , with a UK market estimated to be worth £20bn in annual revenue, covering payments, software, data and analytics and data management platforms3.
Technology continues to transform the financial services sector, with customer interactions increasingly through online portals and mobile devices via accessible apps (in 2013, 12.4m people in the UK downloaded banking apps and conducted 18.6m transactions a week on their mobile phones). However, in addition to the growing expectation among customers for easy access to financial services products and services by digital challenges, financial services companies continue to wrestle with dated processes, legacy IT infrastructures and vast quantities of data from a wide range of sources.
Activities as diverse as insurance underwriting, wealth management, institutional investing, life insurance and pensions all face the possibility of transformation by the advent of ‘big data’. If it is possible, as it seems to be, to know, in real time, all that there is to know about a person’s lifestyle, diet and location, what does that mean for underwriting and pricing of personal insurance risks? If all the available data in the world about a company, to a very fine level of detail, including what each employee ate for lunch, as well as what it is currently paying for its debt in the bond markets, what does that mean for the investment process?
The Fintech opportunity
The UK financial services sector accounts for approximately 9.4% of UK GDP and is one of the largest globally employing more than 1.1m people across the UK (two-thirds outside London). Over the last decade, the UK has been an early adopter of innovation and new business models in financial services spanning ecommerce solutions aggregators and peer-to-peer lending services – often helping to lower upfront costs, greater convenience and focused on internet delivery.4
Innovation in terms of payments, platforms, software and data analytics has impacted on retail and corporate banking insurance and asset management, encompassing large incumbent technology firms supporting financial services players and emerging small Fintech firms using new technology to open up the financial services market for consumers and developing disruptive business models. Areas identified where the UK could take international leadership include: risk management; compliance/fraud software; and online payments.5
In Scotland, the Fintech market continues to grow, with companies such as Money Dashboard, MiiCard, FreeAgent and Lending Crowd seeking to innovate for a global market. As the financial services market continues to wrestle with various types of data challenges (big and small) the opportunities to deliver innovation into key industry players and independently will only continue to grow.
This is why; The Data Lab is launching a sector specific call for projects, targeting the financial services industry and the Fintech community in Scotland. We are looking for innovative and collaborative projects between an industry and/or public sector lead organisations, and one or more academic partners. Projects must demonstrate a clear economic or social benefit for Scotland, and focus on a Fintech solution, product or service.