Consultants like to put out blue skies research mapping out how future changes in customer expectations as well as trade and business patterns will require a different approach to banking. One of them confessed to me recently: “We just reviewed our predictions for the past 10 to 15 years and every one of them was wrong.”
Why? Because banks still do not have the quality of data and/or the systems to use that data to exploit these opportunities. At a time when the latest buzzword is big data, banks are still grappling to handle large quantities of 'small' data. As big data grows, that disconnect is going to get exponentially worse unless banks make drastic changes.
More on the 'big data' debate
To get an idea of how fast that disconnect is increasing, consider the rate of growth of big data – that is data from multimedia, social media and the internet, which can be analysed for better knowledge of markets and client needs.
Ninety per cent of the world’s data was created in the past 12 months! Unsurprisingly, Google’s CEO Eric Schmidt puts it best: “There was five exabytes of information created between the dawn of civilization through 2003 but that much information is now created every two days, and the pace is increasing.” An exabyte, by the way, is 1,000,000,000,000,000,000 bytes.
Clever use of big data could enable a bank to tell a saver or a borrower about how his or her plans measure up to those of every other saver or borrower in the country with an equivalent lifestyle or business. This is valuable information in making a smart financial decision.
But maybe that is rushing ahead. At present, banks have trouble using the client information that they do have. Quite often they collect it well enough at the point of client contact but it becomes unusable as different parts of the bank input it according to varying standards.
This is how one of The Banker's writers described the result in an amusing comparison of banks with Amazon: “If Amazon was a bank, the book division would not talk to the music division. The music division would not talk with the electronics division. The retail business would not talk with the wholesale business. The wholesale business would not talk with the cloud business. Oh, and the Kindle division would not even talk with the book division!”
The best hope in recent years was that the onslaught of regulation would finally convince banks that a complete overhaul of data systems was unavoidable. But this does not seem to have happened. Every two days of delay, the problem gets 1,000,000,000,000,000,000 bytes worse.
Brian Caplen is the editor of The Banker
