Impact of Big Data on the Banking

and Finance Sector: A Review Paper

Abstract

In the current era of information technology, big data has become increasingly important

in almost all industries around the world. Big Data is now known for its ability to

facilitate effective decision making. Companies all over the world are now using big data

for market and customer analysis; however, big data usage in the financial sector is much

higher. The banking sector has been greatly impacted by the emergence of big data. With

the help of big data analytics, banks are able to gain insights into customer behaviour,

detect fraud, and make more informed decisions. Additionally, big data has also enabled

banks to personalize their services and products based on individual customer needs and

preferences. This has resulted in increased customer satisfaction and loyalty, ultimately

leading to higher profits for the banks. Considering the importance of big data in the

financial sector, this paper is an attempt to conduct a comprehensive literature review in

the field of big data and finance. As a result, the study will add to the body of knowledge

by opening up new avenues for empirical research in the fields of big data and finance.

 
 

Introduction

Big Data is gaining importance day by day and is gaining the attention of researchers and

academics. The term "big data" has been developed to enhance the term data that is

gathered through various sources. With the passage of time and especially with

technological advancements, the concept is gaining attention. However, the current

infrastructure, executives believe, is unable to handle the huge data sets appropriately,

and the technology capability, structure of the organisation, and capacity of the systems

to process the data, which is gathered from different areas, are hardly handled properly.

Issues further exceed the storing of the data for a longer period, and efficient

management of the big data is insufficient. Companies handle big data projects as

separate projects, but most organisations require proper preparation for such requirements

as per the areas that need to be aligned for handling the complexity. Big Data projects are

the riskiest investments as they involve a huge level of preparation and are used to handle

financial forecasting and other financial matters. Businesses are currently facing

difficulties in handling the challenges and getting benefits from big data, as well as

making efforts to handle the challenges of big data. Proper big data handling is a system

where businesses use data warehouses, online analytical processes, and dashboards to

facilitate clear, useful, and detailed information that is useful for in-depth analysis. The

major disappointment occurs when the organisation feels that its investment in big data

projects has failed to meet expectations. This disappointment has several issues, such as

an inability of big data and analytical systems to handle and generate required reports

over the big databases, varying results or deviations of forecasting from the actual results,
and the inability to make effective decisions. Governments are also facing challenges

with handling big data, despite having unlimited resources. To meet these challenges, the

users are trying to add new caps. Big Data is a term that describes the capabilities like

storage of huge, complex databases with the help of advanced tools and techniques. It is

important for large firms to have large revenues, relatively stable revenue streams, and

good credit repute in order to handle their large customer base and maintain proper

financial records. With the technological advancements of faster processor speeds, this

capability has attracted financial analysts more than other users of big data. The objective

of this review is to understand the challenges associated with big data in finance in light

of the existing literature. The findings of the current research are significant for the

organisational managers dealing with finances so that they may effectively adopt big

data. Furthermore, the review highlights the potential benefits of using big data in

finance, such as improved risk management, fraud detection, and personalised customer

experiences. It is crucial for financial firms to embrace big data analytics to remain

competitive in today's fast-paced business environment.

Characteristics of Big Data

Big Data is a phenomenon that has no perfect definition, but three dimensions have been
identified that are recognised by all definitions. These three dimensions are data volume,
data velocity, and data variety. The massive volume of data is generated at an accelerated
rate, known as increasing velocity, and is gathered through various sources. The term
"big data" is defined as a data set that is beyond the ability of typical database software
tools to capture, store, manage, and analyse. The three V's of big data represent the three
different dimensions: volume (volume), velocity (speed), and variety (volteness,
scalability, and variety).
The three Vs have currently grown to five Vs by adding veracity and value. Big Data
Analytics is the process of extracting meaningful information from data. It involves five
dimensions: volume, velocity, variety, veracity, and value. The five Vs of big data are the
key features that differentiate conventional data handling from current data analytics. The
volume dimension refers to the vast amount of data generated every day, while velocity
relates to the speed at which data is being produced. Variety encompasses the different
types of data available, including structured, unstructured, and semi-structured data.
 

Big Data and Data Analytics Overview

Big Data and Big Data analytics are terms used to describe the large volume
of high velocity, complex, and variable data that require advanced
techniques and technologies to enable the capture, storage, distribution,
management, and analysis of the information. Big Data was first used by
NASA scientists in 1997 and is a wide range of concepts that cover
collection, aggravation, transformation, and derivation for understanding
human behavioural patterns. It is used to create new business opportunities
and is gaining financial benefits in terms of cost cutting or an improvement
in productivity. By using big data analytics, the existing old data is
processed using advanced tools. Big Data analytics is a technological
paradigm shift that helps to understand the valuable insights and associations
among variables.
It has enabled businesses to make forecast-based business decisions instead
of using structurally stored, regular, correlated databases. This capability of
big data analytics also helps businesses optimise their decision making. Big
Data volume chain is a continuous process that helps businesses make
effective decisions in the face of changing business environments and
customer preferences. It covers the analysis of time series data stored in data
warehouses and real-time data collected at an accelerated rate. Big Data
analytics is a methodology used to extract, transform, load, and analyse data
based on historical trends.
It is also known as "intelligence," and companies use this strategic capability
to gain a competitive advantage. Big Data analytics covers all ways in which
the data can be collected, such as call logs, websites, content generated by
online users, search engines, and images, which are convertible into
structured, valuable information. This methodology is used in various
industries, such as healthcare, finance, and retail, to make informed
decisions and predictions. It involves the use of advanced technologies like
machine learning and artificial intelligence to process large volumes of data.
Big Data analytics has become an essential tool for businesses to gain
insights into consumer behaviour, preferences, and trends. By analysing this
data, companies can optimise their operations and improve their products
and services to meet the needs of their customers.
 

The Significance of Big Data in Banking and Finance

Big Data analytics are now being implemented in the banking sector to help banks

provide better services to their customers, both internal and external. This study analysed

transactional and sentimental analysis for the banking sector, and the outcomes of the

same are mentioned. It was found that customer sentiments are captured and used to

assess the functioning of the bank, and that banks are using social media websites and

market research channels to capture customer data for algorithm analysis. Additionally,

the spending patterns of customers are being used to measure consumer behaviour based

on channel usage and consumption patterns and segment consumers based on these

attributes. These findings can be implemented into the financial systems used at banks to

strengthen data security, prevent attacks, and create a holistic approach to decision

making. Overall, the study highlights the importance of utilising customer data to

improve banking services and customer satisfaction. By analysing transactional and

sentimental data, banks can gain valuable insights into consumer behaviour and

preferences, which can inform future business strategies and improve overall

performance. These findings have important implications for the banking industry as a
whole, as they suggest that leveraging customer data is key to remaining competitive in

an increasingly digital marketplace.

Future Scope

This study can be expanded to try and quantify the financial and non-financial benefits

that the banking sector received after implementing big data analytics, as well as predict

improvements in the bank's financial statements. This work can also be expanded to

cover the various data mining techniques that banks can use to improve the quality of

their analyses.  

References

 Impact of Big Data Analytics on the Banking Sector: Learning for Indian
Banks Utkarsh Srivastava, Santosh Gopalkrishnan