Financial companies have always used data, but nowadays data is generated, collected, stored and processed at unprecedented rates. Observing that the entire sector is being reshaped by data analytics and personal data is being used motivates the JCESA report. The ESAs understand big data based on the European Commission’s concept of three V’s: with volume, variety and velocity, they define it as the collection, processing and use of a large amount of data, which varies in type and source, and is generated and processed at high speed. The concept of big data is hence not limited to the data itself, but also refers to the different technologies and procedures for processing and analysing it.
Big data can reveal patterns and correlations, generate new ideas and solutions and accurately predict future events. The ESAs observe big data use by business to improve product development, internal efficiency, marketing campaigns, fraud detection, pricing, targeted offers, distribution and regulatory compliance. Collected data for these purposes are, for example, ID or contact details, browsing history, professional data, personal interests, financial and payment data, consumer complaints, location data, or medical information. Banks, for example, use financial payment data for credit worthiness tests. Insurers make use of telematics boxes in cars, smart homes and wearable devices to monitor behaviour and individually adapt prices by granular segmentation of risks. Asset managers base their investment strategies and financial risk management on big data. Corporates enhance financial analysis by adding non-traditional data sources to economic results. Aggregator services use financial and payment data from bank accounts of consumers for dashboard and accounting products.
The report does not include statistics about the use of big data, but observes that Chief Data Officers are increasingly appointed within financial institutions. The ESAs suspect that many firms may already be using big data without making it public to avoid reputational risk and actions by competitors.