In recent years, organizations have made digital transformation a top priority. To achieve success, they need to effectively harness their financial data to increase revenue, improve customer experiences, foster innovation, launch new products, and expand into new markets.
Companies need to generate insights in real time to unlock the full potential of all their data. According to industry projections, nearly a third of all data will be real time by 2025. Analyzing real-time data is critical to staying ahead of the competition, as businesses can respond quickly to changing market conditions and customer needs.
In the financial services industry, real-time data has never been more important. With the adoption of fintech, customers expect fast, personalized, and convenient experiences. Real-time data can enable financial institutions to meet these expectations by providing up-to-date information about customer behavior, market trends, and risk factors, empowering them to make informed decisions quickly and efficiently.
For example, financial institutions can use real-time data to detect fraudulent customer transactions, develop models to predict credit risk, and provide personalized services and offers. All while ensuring a seamless customer experience that boosts satisfaction and loyalty.
However, leveraging real-time data requires a modern data architecture that can instantaneously process and analyze large amounts of data. Financial institutions must invest in the appropriate technologies to transform real-time data into actionable insights to gain a competitive advantage.
Detecting Fraud with Graph Analytics
With the rise of digital payments and online applications, fraud has become more sophisticated and prevalent, posing a risk to every transaction in the customer life cycle. Financial institutions must be vigilant against the increasing threat to avoid financial and reputational damage.
To improve fraud detection efforts, the industry has embraced graph analytics to identify fraudulent behavior and take appropriate action quickly. With a graph database, financial institutions can analyze vast amounts of complex data to identify patterns and relationships that traditional methods can’t.
A graph database consists of data elements and the connections between them. Each data element represents a person or an account, while the connections represent the relationships between these entities, such as transactions, identity, or social connections. Financial institutions can analyze the relationships between the data elements to identify suspicious patterns, such as multiple accounts being opened under different names but with the same IP address, or a group of people making transactions to the same offshore account.
PayPal is one company that has successfully used graph analytics to prevent fraud, saving millions of dollars in fraud losses. With a vast network of users and transactions, PayPal uses a custom-built solution capable of analyzing billions of records within 20 milliseconds to determine if there is fraud risk.
Leveraging Document Data Stores for Credit Risk Models
Document data stores are increasingly used in credit risk management as they can store and analyze large amounts of unstructured data. These document databases collect data from various sources, such as credit bureaus, financial institutions, and social media platforms, to provide a comprehensive view of a borrower’s creditworthiness. Financial institutions can analyze this data in real time using machine learning algorithms to identify patterns, trends, and potential risks and take proactive steps to mitigate them. The insights can be used to create risk models that evaluate a borrower’s creditworthiness based on credit history, income, and employment status.
For instance, financial institutions can analyze transactional data and credit bureau information to help quickly identify customers experiencing financial difficulties and take prompt action to assist them before they default on their loans. Additionally, financial institutions can use predictive analytics to develop models that identify potential credit risks before they materialize, allowing them to adjust credit limits, offer alternative payment arrangements, or start collection efforts.
Using Document Data Stores to Unleash Personalization
Personalization is instrumental in building strong customer relationships in the financial industry. To offer these experiences, financial institutions can create 360-degree customer profiles by aggregating data from various sources in real time, including mobile and location-based services.
A document data store can manage in real time all this customer information, such as personal information, financial information, and transaction history. Financial institutions can better understand their customers’ financial behavior by analyzing this data with artificial intelligence (AI) and machine learning and offer tailored product recommendations, personalized financial advice, and targeted marketing campaigns.
For example, by analyzing a customer’s spending habits and investment preferences in real time, a financial institution can provide personalized product recommendations better suited to their needs and preferences. They can also use personalization to offer customized pricing, credit scoring, interest rates, and loyalty programs, speed up customer onboarding, and predict and prevent customer churn. By using these techniques, financial institutions can enhance the customer experience and improve their bottom line.
The financial services industry faces a significant challenge in managing the massive volumes of data generated daily. By adopting a modern data architecture, they can effectively analyze this data, enabling them to stay ahead of potential fraud activities and credit risks while delivering the personalized experiences today’s consumers expect.