Tuesday, November 8, 2016

How Big Data is Changing the Banking Industry

The article, Big Data: How CitiBank Delivers Real Business Benefits With its Data-First Approach outlines how big data is taking the financial services industry by storm. Big data is used in many industries including insurance, healthcare and even sports, saving businesses money and providing insight to important trends. Recently, retail and investment banks have begun to collect large volumes of data to improve their analytical landscape. The reason why the banking industry has lagged others in implementing big data analytics is due to the sensitivity of the data, the need to protect the best interests of their clients and the need to make consequential decisions in real time. Nonetheless, the banking industry, led by CitiBank has engineered big data models that span across many different applications, positively affecting many of their business ventures.
            Considering CitiBank employees nearly a quarter million people globally and have many different lines of business it would be impossible to implement a uniform analytics program for the entire firm. Therefore, CitiBank analyzes the expected benefits and opportunity cost to determine whether a certain business line would benefit from big data analytics. One specific operation of CitiBank that has benefited from this is their customer retention and acquisition. Citi analyzes data using machine learning algorithms to track spending habits of their customers. This provides valuable information that can be used to make actionable decisions regarding customer service, fraud detection, compliance and more. Citi also uses big data to spot anomalies, which allows them to help predict unusual or incorrect charges. Michael Simone, Managing Director of Data Platform Engineering claims that if these anomalies, or “errant data points” as he refers to them can be identified, Citi can save substantial amounts of capital. Citi has been a catalyst in the big data analytics space in banking but are continuously looking for more effective ways to implement analytics.

            Simone states that of the many big data analytics ventures Citi has taken on, only a small fraction of them involve real time decision making. He claims that this is where the industry is focused in terms of innovating their use of data analytics. This part of the article resonated with me greatly as I will soon be graduating and pursuing a career in the financial services industry. Clearly, this is an ever-changing industry, so the importance to be able to see around the corner in terms of what types of innovation are taking place is crucial. It will be interesting to see how the gap between big data analytics and real time decision making closes in the coming years, and what impact it has on the industry. The goal of implementing big data analytics in banking was to help banks serve their customer’s needs more effectively, if analysts can do so in real time, the results could be profound. 



  1. This blog post caught my attention because I do not pay nearly as much attention to the banking industry as I should. I can see why the banking industry was slow to move into Big Data, but it surprises me that now they are realizing how much they can benefit from using analytics, especially when it comes to their customers. I have never had to deal with fraud detection or anything like that, but I am willing to allow my bank to track my spending if that means that they are able to quickly catch when I am not the one doing the spending. Less privacy leads to more security and less banking errors in this case, so I am sure many people would also agree with this outlook. Also, they are not implementing data analytics in every sector of the business, and are choosing the areas that would benefit the most from Big Data.
    I agree with Kris that this just shows that banking is not a stagnant industry. It is like an industry, and for any industry it is important to change and adapt to new situations in order to stay competitive. I am currently in Business Policy, and I have learned about the necessity of firms in their respective industries to be innovative and provide services that other companies cannot provide in order to make your company more appealing than all the others. I feel that is what CitiBank is doing with their analytics. Kris states that the banking industry “has engineered big data models that span across many different applications” and that CitiBank is the firm that is leading the charge, indicating that they are ahead of the competition. Not only can they provide services that other banks may not be able to or not as successful in or as good at as CitiBank is. Though, it is also mentioned that very little of the data usage is aimed at real time decision-making, which I believe could further push them ahead of the curve if they began to focus on that. Ultimately though, what CitiBank is doing with their data is beneficial to them and their customers. It saves Citibank time and money by using data analytics for operations such as customer retention and acquisition, as Kris mentioned, which are huge for company growth. This opens up a lot of opportunity for Citibank and also shows the positive impacts of using Big Data in the banking industry.

  2. I became interested in this article because I have always thought about the importance of big data in the banking industry. With technology constantly evolving, it is a lot easier for fraud to be committed. While I was traveling abroad last semester I had an incident where my bank froze my account because they detected fraud. By using big data they were able to see that an activity that came across my account did not relate to past activities and they immediately froze it. This time period between the transaction occurring and the lock of my account was immediate and this is is because if the effectiveness of big data. As Kris says in his article, more banks should also use this system because it may save them a lot of money. When a bank does not catch onto incorrect charges they are just letting the person committing the fraud continue with transactions. The ability to cancel a card right away and contact the person of the account does not allow the charges to increase and they do not have to refund the account.
    Something that I think banks have to look more into is the occurrence of fraud with retail stores. Target a couple years ago had an incident were someone was able to hack onto their systems and get all personal information of those who recently used credit cards at their store. This resulted in many customers who shopped from November 2013-December 2013 having unknown transactions in their account. Hackers were able to access the terminals where credit cards were swiped or collected data from target to credit card processors (cnn). J.P Morgan Chase had to limit the withdrawals from $100 a day and purchases from $300 a day to their customers who shopped at target (cnn). As this is becoming more common, the use of the chip on cards is helping in eliminating and detecting fraud. As our technology is becoming more and more advance, banks too need to become more advance with it.


Note: Only a member of this blog may post a comment.