There has been a backlash towards ‘big data’— with the term conjuring up a vision of companies mining customers for information, and ignoring their privacy in the meantime.
There has been a backlash towards ‘big data’— with the term conjuring up a vision of companies mining customers for information, and ignoring their privacy in the meantime.
Aside from confidentiality concerns, there are also worries around using data to make decisions. Opponents to the idea of intense data analysis argue that data is not emotive enough, doesn’t take into account social relationships, and struggles with conceptual ideas.
Nassim Taleb, the author of Antifragile, has said that the more data found, the more correlations are found, and mistakenly perceived as meaningful.
But Andrew Butler, co-head of asset and fund services in the UK for BNP Paribas Securities Services, stated in a recent meeting that while the term may be a buzzword, its application has significant opportunities for both custodian banks, and their asset manager or institutional investor customer base.
“[Big data] is an industry buzzword, but what it’s referring to is the increasingly huge amount of increasingly complex data that’s available. ninety percent of all data stored all in the world today was made in the last two years, and 80 percent of the world’s data is unstructured, by which I mean that it is not held in a company’s databases.”
He quoted the McKinsey Quarterly, which said that companies that use data and business analytics to guide decision making are more productive than firms that don’t.
A recent article from McKinsey also said that big data require investment, measured both in money and management commitment, and can be a mammoth project.
“CIOs stress the need to remake data architectures and applications totally. Outside vendors hawk the power of black-box models to crunch through unstructured data in search of cause-and-effect relationships. Business managers scratch their heads—while insisting that they must know, upfront, the payoff from the spending and from the potentially disruptive organisational changes.”
From a leg-up to the forefront
Initially, said Butler, data used in financial services was exploited by large, technologically savvy investment banks; looking to one-up their competitors. They looked at small price differentials across markets and news events, hoping that data would give them a fraction of a second advantage over their rivals.
As for what that means practically for the asset management industry—which historically has fewer resources than the investment banks—Butler said that the challenge is creating the ability to access, understand and manipulate huge volumes of data from a wide range of sources.
“Data on its own is meaningless—it only becomes useful once you do something with it. As a custodian, we hold a huge amount of a client’s data. Combining that with our ability to go out and search for the 90 percent of data outside of the infrastructure database allows us to help our clients pursue their goals of managing and growing their business effectively.”
Maintaining client confidence is another vital aspect to any data provision offered by a bank, particularly seeing as asset managers have suffered from the same sort of bad press that has plagued investment banks.
As well as this, generating new revenue is vital for both asset manager and custodian bank, as Butler illustrated.
“We are investing heavily in data, and in many cases looking to recover some of the lost revenues around custody. Some of the traditional revenues and ancillary revenues around FX, securities lending, etc, are under increasingly stringent focus from regulators, which is leaving a gap.”
But while a number of organisations are seeking to effectively ‘sell’ data, Butler said that BNP Paribas takes a less cost-focused approach.
“There are some direct costs associated from licensing and maintenance, but actually they are not material. We see many other benefits of providing that data in a useful way.”
In developing solutions, Butler added that a client-focussed approach was the only way forward.
“We are using a much more fluid and dynamic way of working. The days of sitting in a laboratory with a screwdriver and working out where you can sell your product are long gone. It is absolutely essential that you are close to the clients, right from the design phase. Clients are providing the agenda.”
