The Future of Data Monetization in Financial Services: Investment & Risk Management

Data has revolutionized the way that industries conduct business today. As financial services institutions continue to seek a competitive advantage and strive to increase market share, the ability to leverage and monetize data has become a necessity in today’s hyper-competitive environment.

The data gathered by financial institutions provides a broad array of information, spanning from the most basic data such as a name or photo to much more sensitive information, such as a social security number or financial habits. Access to this type of information, if leveraged correctly, can generate significant monetary value while still meeting the constantly evolving needs of customers.

In this article, we discuss the opportunities available within the projected $7.3 billion data monetization market and take a glimpse into one of the key focus areas that will drive the future of data monetization; investment and risk management. ¹

Leveraging data to enhance investment & risk management

Data monetization is becoming increasingly popular in the financial services industry as organizations seek to leverage their vast amounts of data as a valuable resource to generate additional revenue. Beyond revenue generation, financial services organizations can utilize data to reduce the additional costs that organizations tend to incur as they scale and grow.

These cost reductions can be realized through various avenues such as leveraging data to create performance predictions, identifying churn rate, preventing user or customer attrition, and identifying discrepancies and potential risks for fraud.

Understanding patterns and creating performance predictions

Financial services firms can leverage data to understand and identify patterns and trends used to create accurate performance predictions to mitigate additional costs associated with future business operations.

For instance, data analysis can reveal the customer segments that are most profitable, providing opportunities to focus on marketing efforts that yield increased revenues and reduced marketing costs.

Utilizing data to identify patterns and trends gives organizations the ability to streamline business operations, reduce inefficiencies, and improve overall performance.

Identifying churn rate and preventing user/customer attrition

Identifying churn rates to prevent user and customer attrition is another way financial services firms can leverage their data.

By assessing behavioral data, organizations can identify patterns that indicate “at-risk” customers. These are typically customers who could potentially leave and never return as an investor. For example, customers who have not used a service or product for an extended period could fall within this group. Customers who are dissatisfied with their experience or those who have experienced poor service may also be at risk of churning.

Identifying these patterns early on allows organizations to take proactive measures to retain these customers. This can be achieved by providing more personalized offerings, experiences, and outreach which can help with attrition and reduce the costs associated with new customer acquisition.

Identifying discrepancies and potential risks for fraud

Additionally, financial services enterprises can leverage their data to identify discrepancies and potential risks for fraud.

Assessing data for unusual patterns or discrepancies provides organizations the ability to quickly identify potentially fraudulent activities and take immediate action to prevent further loss. This can help mitigate the additional costs associated with fraud such as financial losses, reputational damage, and legal fees.

Business outcomes of investment & risk management

Firms across the globe are progressively adopting data monetization methods to stay competitive within the global economy. The financial services organizations that will be most successful over the next decade are those who will have the capability to synthesize acquired data and monetize that data in creative ways.

Leveraging data offers opportunities for firms to improve their risk management processes and operate in a proactive state rather than reactive in terms of churn and customer attrition.

It will be vitally important in the years ahead for financial firms to implement strategies that focus on investment and risk management to obtain a truly sustainable competitive advantage through operational efficiencies and costs reductions within the growing data monetization market.

References

1. Markets and Markets. (2022). Data Monetization Market – Global Forecast to 2027.
2. Mordor Intelligence. (2022). Data Monetization Market – Growth, Trends, Covid-19 Impact, and Forecasts (2023-2028).