The data deluge in fintech

November 17, 2020
In an article in the venerable technology publication Information Week, I wrote about ponderous and misleading nature of the oft-made comparison of “data” and “oil.”

While the “data is the new oil” metaphor has elements of merit, it falls short in one critical place – you can never have too much oil but you can certainly have too much data. I averred that the apt analogy is comparing data to water – after all, water can give life but too much of it can do the opposite- we all know of water-logged fields becoming fallow. Indeed the analogy increases its power when we consider the notion of a “deluge” or flood- of either data or water.

It has long been known that data by itself is not particularly useful. With no effective way to make use of data, it just “sits there” and frustrates us.

If for instance a company has a lot of customer data somewhere in the bowels of its corporate systems but has no way to extract it, make sense of it, or act on it, its existence is meaningless, even negative. For this reason – to make use of data – tens of billions of dollars have been spent in all aspects of data infrastructure- from data warehouses to storage, from data visualization to middle-ware. And so on.

Unfortunately, far fewer resources have been spent on creating a set of processes and cultures that allow an organization to truly drink freely of the data tap. This has been a singular miss in the corporate world.

Fintech companies must avoid this. Traditional financial services companies suffered this fate. They approached data-based customer differentiation with a hammer and not with the fine tools of modernity. While they are quickly changing, they are likely to be beaten at that game by the slew of fintech companies, newly-minted and modern, that are natively data-driven and cloud-based. Data utilization requires agility and agility is a product of infrastructure plus culture.

But fintech companies are not bearers of a silver bullet. They too can succumb to the data deluge. If they do not put data front and center, plan for the deluge from day 1, and act to avoid it, they will suffer the same fate as other organizations. I’ve had the privilege of talking to several fintech leaders about this and I’d like to share some of their wisdom with FinLedger readers:

· From Pulak Sinha of Pepper– “Data is like gold to Asset Managers but usually the gold is locked in a vault and the combination is unknown. Security matters but so does access and usability. Think about that every day.”

· From John Thomas of Zact-“Decide what you need to do and look at the relevant data only. Too much data will paralyze your processes but the right data will drive your innovation.”

· From Samir Saluja of Ahrian-“Always ask the right questions of data. Open-ended ideas with no concrete questions will create a “forever war” and will never be useful.”

· From Clement Ifrim of Quantarium-“A company needs to build interpretive layers to really make sense of data. Data always has a context.”

The data deluge is real. Fintech is not immune. But there are things you can do to avoid the flood if you plan from day one.