Small Data Yields Big Results

Apr  01 
Terry O'Donnell  Director, Professional Services, Fiserv  

Turning readily available, targeted information into profitable actions

Big data is making big noise in the financial services industry. But the technology and resources required to turn big data into profitable actions can dissuade many financial institutions from realizing its benefits. Small data, on the other hand, is readily available in existing systems and often goes untapped.

When your organization uses existing resources to apply use cases to your available data, it can glean targeted information and turn it into profitable actions.

Big data is often categorized by its volume, variety and velocity. Alternatively, small data is in an amount and format that makes it accessible, informative and actionable. Small data offers several benefits for financial institutions.

Identifying Balance Leakage

An increasing number of fintechs are looking for a share of your consumers' wallets. Understanding the how much of those balances they're taking and where they're going can be a game changer.

Performing text searches through ACH and core transaction descriptions to match company names can help identify balance leakage. Fiserv analysts recently researched ACH debit transactions for 190 banking clients, identifying a rise in transaction volume to companies such as Coinbase, eToro, Kraken, Robinhood, Venmo and many others. 

You may be surprised by similar research in your customer or member base. Access to that data can help you identify any problems and devise workable solutions.

When your organization uses existing resources to apply use cases to your available data, it can glean targeted information and turn it into profitable actions.

Solving for Attrition

Mining accountholder spending habits can also help identify attrition. Using large volumes of historical indicators, big data can predict which of your consumers are likely to leave your institution. But collecting all that data can require many months of effort and potential investments in new software, skills and hardware.

Commonsense steps on readily available data can provide insights on attrition. For example, start by identifying all your accounts with four weeks of consecutive declining deposit balances. Stratify the consumers who recently closed an account by number of accounts remaining (targeting those most at risk, or those with one remaining account). Alternatively, you could compare the number of deposits, total deposit balance and year-to-date average balances per consumer month-over-month to isolate downward trends. Implementing reporting and mitigation plans for all three scenarios would be feasible options.

Measuring Relative Profitability

What about measuring relative accountholder profitability? Is that possible with the data you have today? You certainly know accountholders' balance and rate information, what fees have been applied to their accounts, and what product types they have, and can also apply standard annual costs and loan loss rates. Determine how they're performing transactions – in branch or digital – (to derive activity costs that could apply to a standard funds transfer rate.

Once you identify and calculate those dimensions at the account level, you have a clearer picture of consumer profitability. The next step would be completing the same summary according to branch, product or officer levels.

Analyzing Partnership Opportunities and Lending Insights

Mining small data doesn't have to stop at identifying balance leakage, attrition potential or relative profitability. It's also possible to use small data to create new opportunities and partnerships with local businesses. Analyzing transactions can help you establish a baseline of current transaction volume and measure the results of that partnership.

With the increasing need to manage risk and monitor the health of your loan portfolio, it can be beneficial to quickly identify troubled relationships, watching them closely to reduce risk. Fiserv professional services analysts recently helped a financial institution implement this plan which provided one-stop access to all the organization's relevant borrower information, yielding these benefits:

  •  Automated aggregation of all relevant data into one master report
  •  Stratified the loan portfolio by key risk indicators
  • Streamlined the loan review process
  • Decreased the time needed to manage the portfolio
  • Increased productivity
  • Improved risk management capabilities of the risk department
  • Imported updated data to have a more accurate view of the portfolio

All of this was achieved with existing data and tools – no investment in third-party software or training. Small data can provide massive results.

Starting Small Has Advantages

There are hundreds of use cases of mining small data, ready to be executed to your organization's benefit. By incorporating mindful, productive planning strategies, you can gain valuable insights to fuel the success of your business.