everytime i hear the words big data from a banker, they are usually followed by a rapid fluttering of the eyelids and a dilation of pupils typically reserved for foreign particles uncomfortably lodged in the cavities essential to our functioning…
given how often it happens, i am no longer surprised, shocked or struck by its disdain…because what the big data cycle has failed to explain till now, with any particular reason or facts, is what big data actually means and how can it be monetized?
as a participant, beneficiary and visionary of this cycle, my disappointment quickly gives way to tremendous optimism and even stronger belief in the vision we first outlined in a business model (which we called Tresata) 3 years ago with these 3 words – second industrial revolution.
banking (like telecom, healthcare, retail, energy) is fundamentally a data driven business – as i often tell my friends “when you withdraw that dollar from an ATM, it is not the same dollar you deposited…simply a transfer of bits and bytes”.
in fact, in some ways, it is even more so as banks really don’t ‘manufacture’ a thing – they simply trade stuff.
in the banking school for bank executives destined to run their future banks…that i have had the fortune of teaching at, i routinely remind my students that banks were created to be a ‘social utility’…designed for 2 main functions:
1. Ease the flow of trade – with a common currency with value mutually recognized by the buyer and seller
2. Enable leverage – where one mans savings can help build another mans business (or one girls savings can help build another girls business)…albeit safely and responsibly via a process of savings and loans
which explains why bank branches historically were what city centers were built around with grand buildings styled in neo-classocal architecture…
as restrictive laws and regulations made way for more lenient legislations (none more draconian in impact than the Gramm-Leach-Bliley Act, which in 1999 repealed the Glass-Steagall Act of 1933) and technology enabled a rapid expansion of the ability to ‘ship’ bits and bytes anywhere you want, banks became the behemoths and loan guzzlers that no one foresaw judicious limits to…and how it ended need not be recounted yet again…
the question then becomes, how can i claim that big data will resolve this seemingly gordian knot?
my answers are quite simple:
1. in a business of bits and bytes…data reigns supreme
just like many other things he has been right on, warren buffet was right on this one too.
the issue with risk isn’t that it shouldn’t be taken (it literally defines the very ethos of this country), but when taken, should be priced in a way that when the high tide leaves…the world knows you weren’t swimming naked!
the only way we can ensure the growth engines in a society keep firing, is by developing a ‘data currency’ in the new banking system whose value, authenticity and access is equally available to all…a concept i call ‘unlimited financial transparency’
given the volume, velocity and variety of financial markets…this can only be solved by technology…and to ensure it doesn’t cost us billions of dollars + our first borns + umpteen moral hazards…the technology needs to have scale, speed, structure & cost dynamics to take ALL the worlds financial data, process it and pump it out as fast as possible…i think i have a suggestion on what can do that (wink…)
this current wave of ‘big data’ has unleashed a technological breakthrough of such massive proportions, that if applied judiciously to solve societal & business problems…it WILL propel an industrial revolution the likes of which we have never seen before
2. it starts and ends with the consumer
doesn’t matter which part of the banking system you are in and are touched by (retail banking, corporate banking, trading, merchant banking)…at the heart of all of it is you and me…whether its a credit card offering 5% cash back or a CDOsquared…in the end the ‘asset’ being traded is the consumer’s financial health and appetite to consume (aka spend money)…why do you think they a recalled consumers!!
so it becomes even more important that banks understand what financial pressures a consumer is willing to withstand…and understand that at the ‘individual customer’ level…
a segment of 1…assuming that just because 10,000 people who live in the same zipcode will have the exact same financial needs, capacity to pay and cash inflows…will make a dunce of us all (what am i saying…it already did).
we all know it doesn’t work like that….even google doesn’t give me and my neighbor the same recommendation on restaurants when we search for one as they know ‘we do different things’ on the internet…its time to banish the ‘zip code myth’ every single product and service in this country is built and sold on
each and every consumer needs to have a financial strategy customised for him/her/them…
it can be done…has been done with search (google), social (facebook) and shopping (amazon)…and will be done in banking (tresata’s software), healthcare (ibm watson) and other industries as well
big data enables ‘segments of 1’…giving enterprises a chance to become ‘customer advocates’…and those who do will win…win big
3. where there is smoke…
the financial system in the world is totally ******d…if it comes as a surprise to any of you…i am sorry that it took so long for you to be in the know
but we are fortunate to live in an ecosystem that regenerates rapidly after the craziest and deadliest of crisis…because in the wake of the biggest fire…is left fertile ground for growth
the credit crisis has laid bare many myths…the best amongst them being that people who walked, lived and ran amongst the bulls on wall street were the smartest humans to troll this planet…ever…so much for that
common sense always wins…and when things seemingly appear to defy gravity…the landings are always hard cruel and just…
we are at a darwinian moment in civilization where the economic models created successfully in the 30’s and 40’s no longer apply…
the open source movement in technology and the ever falling costs of rapidly developing products and services for consumers will give rise to business models in banking that we have never seen before…’traditional value chain’ models are dead and scalable ‘platforms’ where the marginal cost of delivering an additional unit of product of service is ‘zero’ is the future
big data is a business revolution…that will change how you manufacture, deliver and service products to your customers…at prices, through channels and with care that makes them go ‘how did you that’ with wide eyed awe every single time…
thats the opportunity with big data in banking…question is – when will you get started?