The role of Big Data in Banks

I was listening at R. Martin Chavez, Goldman Sachs deputy CFO just last month in Harvard at the ComputeFest 2017 event, more precisely, the SYMPOSIUM ON THE FUTURE OF COMPUTATION IN SCIENCE AND ENGINEERING on “Data, Dollars, and Algorithms: The Computational Economy” held in Harvard on Thursday, January 19, 2017.

His claim was that

Banks are essentially API providers.

The entire structure and infrastructure of Goldman Sachs is being restructured for that. His case is that you should not compare a bank with a shop or store, you should compare it with Google. Just imagine that every time you want to search on Google you need to get in touch (i.e., make a phone call or submit a request) to some Google employee, who at some points comes back to you with the result. Non sense, right?  Well, but this is what actually happens with banks. It was happening with consumer-oriented banks before online banking, and it’s still largely happening for business banks.

But this is going to change. Amount of data and speed and volume of financial transaction doesn’t allow that any more.

Banks are actually among the richest (not [just] in terms of money, but in data ownership). But they are also craving for further “less official” big data sources.

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Juri Marcucci: Importance of Big Data for Central (National) Banks.

Today at the ISTAT National Big Data Committee meeting in Rome, Juri Marcucci from Bank of Italy discussed their research activity in integration of Google Trends information in their financial predictive analytics.

Google Trends provide insights of user interests in general, as the probability that a random user is going to search for a particular keyword (normalized and scaled, also with geographical detail down to city level).

Bank of Italy is using Google Trends data for complementing their prediction of unemployment rates in short and mid term. It’s definitely a big challenge, but preliminary results are promising in terms of confidence on the obtained models. More details are available in this paper.

Paolo Giudici from University of Pavia showed how one can correlate the risk of bank defaults with their exposition on Twitter:

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Paolo Giudici: bank risk contagion based (also) on Twitter data.

Obviously, all this must take into account the bias of the sources and the quality of the data collected. This was pointed out also by Paolo Giudici from University of Pavia. Assessment of “trustability” of online sources is crucial. In their research, they defined the T-index on Twitter accounts in a very similar way academics define the h-index for relevance of publications, as reported in the photographed slide below.

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Paolo Giudici: T-index describing the quality of Twitter authors in finance.

It’s very interesting to see how creative the use of (non-traditional, web based) big data is becoming, in very diverse fields, including very traditional ones like macroeconomy and finance.

And once again, I think the biggest challenges and opportunities come from the fusion of multiple data sources together: mobile phones, financial tracks, web searches, online news, social networks, and official statistics.

This is also the path that ISTAT (the official institute for Italian statistics) is pursuing. For instance, in the calculation of official national inflation rates, web scraping techniques (for ecommerce prices) upon more than 40.000 product prices are integrated in the process too.

 

 

Mobile and consumerization — keys for event-based Social BPM?

I really appreciated the provocative post by Chris Taylor on the potential of Social BPM to replace emails in business processes. While I see the final statement there a little bit too optimistic, total replacement is definitely in my dreams and I agree on the general trend.

Actually, I see we are already in  a hybrid situation where email or text messaging is still needed for notifying people (especially end users) but with respect to the past they tend to be just reminders or references to the actual info, which is stored on a (web) system. The reason for this is sometimes different than BPM practices.
For instance, you may think about your online bank statement: you get a notification email what it’s available, but then you access it through the bank site. To have them on the web and not within an email is more a matter of security and compliance than of BPM implementation, but what’s interesting is that these small steps are slowly shaping the attitude and the minds towards expecting all behaviour and content to be on a system.

Example of bank statement notification.

What I think it’s still not yet here is the event management part. This still uses traditional means. For this, I foresee two crucial enablers for future adoption:
mobile apps (which can be a part of a “extended” BPMS): getting notifications and dashboards would be very convenient and acceptable by the users
–  “consumerization” of the business interfaces: if people perceive a (business) UI as user-friendly and convenient, he won’t object to using it instead of the email
But this has still to come..

However, I’m not really concerned about the notification phase toward the user, since this is anyway something coming from the enterprise systems. The critical point is to capture the behaviour of the user and the action he performs in response to the trigger. This is what would bring the maximum value to the enterprise in understanding the actual “hidden” procedures that go on within the company or at its borders.
This is the part where email falls short, because email activities cannot be traced in the general case. However, for this I see an even longer way to adoption. 

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