Conquering big data challenges

Big data is here for financial services

An Experian Perspective
Dont get left in a cloud of dust
Financial institutions have invested in Big Data for many years. Regulatory requirements
for record retention often have been the main driver, while development and access for
advanced analytics have been key challenges. New advances in technology infrastructure
have opened the door for leveraging these data caches for better customer insights,
models and strategy development in the past few years. While the technology exists,
adoption is challenged by factors such as a soft economy, costs associated with
infrastructure and lack of internal know-how.

Where weve been platforms. Historical customer data and transaction data
may reside in different warehouses, treatments remain
Financial institutions are flooded with a massive amount
in the Customer Relationship Management (CRM) or
of information, including:
application systems, and some data could even be stored
Customer information and their performance on a single analysts local desktop. This creates a problem
over time because executing effective analytics on widespread
Transactional information and marketing campaigns data not only is inefficient, but it also opens the door for
missed opportunities and compliance challenges. Not
Different customer views in various databases
knowing where data exists or not having access to these
(e.g., CRM and application systems)
key elements can change the outcome of the best model
Prospects, partnerships, market demographics or strategy. The key to staying competitive is not only
and even competition what your analysts know and apply to models, but also
Consumer and business credit data leveraging that information in an efficient and increasingly
scalable manner to drive strategies across array and
One of the challenges with executing analytics on these data variety of data.
sets is the fact that they are spread across many different

Page 2 | Conquering big data challenges

Navigating the business
challenges with Big Data
The four strategic challenges most financial institutions
face when defining their end-state Big Data analytical
infrastructure are development, data, integration and
regulatory compliance.

The challenges
Development
Costs for system development can be daunting, ranging
from $5 million to $100 million
Lack of internal experts on new systems and technology
Difficulty around accessing legacy systems and
incorporating ongoing traditional processes
Data
Internal data flows for movement of large files
and across silos
Data governance and data linkage
Ongoing sourcing and integration of new data
from third parties The biggest advantage in moving to Big Data is giving your
analysts the ability to do their work faster and with greater
Integration
flexibility than before. This benefit translates into a real
Integrating new systems with existing tools and
competitive advantage as the business gains greater insight
processes
and intelligence into customers, their activities and their
Implementation across business units and divisions
interactions, thus leading to the development of relevant
Regulatory compliance analytics and strategies.
Ensuring compliance with regulatory requirements
regarding data retention for model building
Adherence to depersonalization and security
of sensitive information The biggest advantage in moving to Big
Planning for future regulations Data is giving your analysts the ability to
do their work faster and with greater
Financial institutions are starting to look at Big Data as an
flexibility than before
investment rather than a technology expense. Proving
return on investment (ROI) on Big Data infrastructure is a
common concern, and businesses must evaluate multiple
benefits across business lines, e.g., marketing strategy
improvements, risk management, cross-sell strategies
and operating efficiencies, as they try to overcome initial
investments on internal system development. The key to
an initial Big Data ROI analysis often is about what costs
can be eliminated once a Big Data platform is in place.

Big data is here for financial services | Page 3

 The time to invest is now
70% of enterprise organizations are Your business is likely investing in Big Data already.
either deploying or are planning to However, the transformation of data into actionable
information is the next threshold to cross. With the entry
deploy Big Datarelated projects cost into Big Data technology shrinking, now is the time to
or programs invest. This investment is about not only getting ahead, but
also remaining competitive. In a recent Forbes article, the
International Data Group (IDG) revealed:

Seventy percent of enterprise organizations are either

deploying or are planning to deploy Big Datarelated
projects or programs
Nine percent of these businesses plan to spend from
$10 million to $100 million on Big Data this year, with an
average investment of $8 million
Quality and speed of decisions are the main drivers
for investment

While the investment dollars from IDG seem staggering,

its important to note that there are various options for
entry. This includes outsourcing into cloud-based hosted
environments that not only minimize costs, but also offset
internal development timelines and resource constraints.
Big Data doesnt have to be a budget-busting initiative.

The cornerstone of a successful

big data infrastructure
Big Data has become an all too common phrase in the
industry, arguably to the point of overuse. While Big Data
can have different connotations for different business
entities, in general it is the only fitting way to describe
the availability of large data sets that may not have been
accessible before. Gartner defines Big Data as high-
volume, high-velocity and high-variety (3Vs) information
assets that demand cost-effective, innovative forms of
information processing for enhanced insight and decision
making.1 While this definition may seem quite intimidating,
the 3Vs are the building blocks for most Big Data
technologies. For many businesses, the true definition of
Big Data might be It depends. The truth is that the phrase
Big Data is relevant not only based on the size and scale
of the business, but also on the data sources available to it.
Big Data is not just about increased data and storage. Its
also about finding opportunity in your existing data sources
Page 4 | Conquering big data challenges
and scaling for the future.
The 3Vs of data management
The 3Vs of data management, originally introduced by
Doug Laney of Gartner, speak to a three-dimensional view
of data-management platforms. They (or some variation of them)
have largely been adopted by the industry to define Big Data. Thirteen
years later, the same 3Vs Volume, Velocity and Variety now are the
cornerstone dimensions for any Big Data service.

VOLUME
Volume of data is nothing new for financial institutions. For many years, banks have been receiving and processing
millions of transactions, payments, applications and automated customer treatments on a daily basis. Over time,
these volumes have increased as a result of gathering additional data points not captured traditionally and an
increase in the frequency of transactions. Increased volume also can be attributed to the need to service customers
better during automated phone and online interactions by retaining data, such as log events, as customers interact
with the business. There is not only more data being captured and stored, but it also is broader, deeper and
more complex.

VELOCITY
Velocity also is nothing new for financial institutions such as credit card issuers and processors. Along with daily
volume, transactions need to be processed quickly. Most banks can make a decision on a credit application in
seconds or determine if a transaction meets conditions for potential fraud in near real time. Velocity in Big Data
analytics speaks to a businesss ability to take the volume of data quickly transactions, payments, applications
and customer-interaction events and position it for use by analysts so they can improve strategies and customer
insight. Velocity also speaks to the speed at which the technology used to house Big Data can process these vast
chunks of overflowing data points. While simple in concept, the velocity of data coming into a financial institution can
often slow the process of transforming data into insight.

VARIETY
Enterprise data arrives in a variety of types and formats. While in most cases data gathered internally from databases
such as transactions, Customer Relationship Management (CRM) and application systems is somewhat
structured, making these data sets from across various systems available to analysts and business users in a
consistent format is a hurdle that must be cleared. Inconsistent formats from varying tools across business silos
further complicate the process of turning Big Data into actionable insight. If you factor in the influx of unstructured
data such as data from social media, customer or industry blogs, call centers and product reviews the task
of making the data usable for a wide audience becomes even more difficult. New file-system structures, such as
Hadoop, are slowly taking market share away from traditional structured databases because they have proven an
ability to handle data of varying formats, both structured and unstructured.

Big data is here for financial services | Page 5

 analysis to detect potential independent variables that can
identify a swap set. Once swap-ins and swap-outs are
defined, clients can test the new challenger strategy either
by running a test campaign or by testing the outcome in an
independent strategy simulation within our sandbox.
The analysis is focused on the following questions:

Did I make the right decision? Are the customers

that I thought were too risky still a risk?
If not, when did they improve and how do I identify
predictive behavior for improvement at the time of
making a decision?
Would I book them today?
Did a competitor book them with a similar
product in a 60-day window?
Are the customers I booked as good as I thought?
Are they profitable?
Did they book competing products in the same window?
If so, are they using my product or the competitions
and why?
Concept in motion
Wallet-share analysis
what our clients are doing Wallet-share analysis is similar to market-share analysis
with our hosted data platform but with a twist. Market share is geared toward how your
portfolios compare with your competitions. Wallet share
Since the launch of Experian Analytical SandboxTM our
takes this analysis a step further and asks the question,
clients are discovering that Big Data provides limitless
How does my product perform versus the competitors
insight into customer trends and provides them with the
product in my customers wallet? The goal is to highlight:
tools they need to keep ahead of competition. Beyond
traditional segmentation, modeling and strategy Position in wallet
development some additional examples of the ways Are customers using your product as their first,
clients are leveraging on-demand historical credit data second or third option?
sets include: Are your customers paying you first?
What payment stresses do your customers have
Decline analysis/reject Inference from other lenders?
Decline analysis is all about refining your discreet back- Is there cross-sell potential within your portfolio?
end decisioning criteria on all credit applications that come
Wallet share then can be taken a step further by leveraging
through your door. It is more easily defined as Where can
peer grouping to view the same analysis for your top
I do better? The concept is applied through an overlay
competitors, thus giving complete market-share insight.
of a financial institutions application history and account
performance onto a raw credit snapshot in the Experian
Analytical Sandbox and the monthly credit data following Experians hosted analytical sandbox solves
the point of application through 12 or 18 months out.
The analysis then goes a step further and leverages a
these challenges by providing a fully hosted
Chi-Squared Automatic Interaction Detection (CHAID) platform with a secure Web-based interface

Page 6 | Conquering big data challenges

How to get the most out
of Big Data hosting
Financial institutions have leveraged their in-house
historical data for many years to conduct look-back
analysis, and it was the most common technique used
to predict future performance. While this technique
works marginally well, it presents multiple challenges
associated with a sample that is skewed to an institutions
customer base and performance within the portfolio. The
missing link always has been how the same customers
perform elsewhere and what other customers who are
not part of an entitys portfolio look like. The only method
of gaining a full market perspective was to purchase a
large amount of depersonalized historical credit data sets
and hope no essential data elements were missed in the
requirements phase
Until now, the challenge to acquire vast amounts of
historical market sample data was cost-prohibitive and
potentially unmanageable, especially at the raw data
level due to size constraints. Experians hosted analytical
sandbox solves these challenges by providing a fully
hosted platform with a secure Web-based interface
that not only gives clients access to vast amounts of
The power of data is good. Couple it
on-demand historical credit data both at the raw and with analytics and it becomes great.
aggregated levels, but also provides the analytical tools to Craig Boundy, CEO, Experian North America
allow our clients to join their in-house performance data
with the historical snapshots.

Development Data Integration Regulatory Compliance

Quicker implementation Integration to key data sources Create departmental synergies Data compliance issues
are solved
No development costs for clients No data lag time for backfill of Consistent nonconflicting insight from
Reduced overhead through relevant size all groups/departments Satisfies Fair Credit Reporting Act rules
hosted access Unbiased samples for stronger Ability to create consumer links through No need to devote overhead to manage
Immediate access, to allow you to models and strategies a full consumer relationship picture sampling and depersonalization
build stronger models and strategies
instantaneously

Big data is here for financial services | Page 7

The Experian difference Experian Decision Analytics Our financial-industry
experts can build, enhance and expand your current
Experian is widely recognized as a global leader in strategies, attributes and models. From acquisition
consumer credit data and analytics. Armed with the right strategies to Comprehensive Capital Analysis and Review
tools and the right resources, Experian is well-positioned to compliance, we can help you navigate your way with ease.
assist your business in conquering Big Data challenges by
Experian Analytical Sandbox Our remotely hosted Big
offering best-in-class:
Data platform gives your business the power to integrate
Custom consulting Establish your Big Data business plan credit data into your analytical framework without systems
from mission to completion. Our global consulting team can development, resource acquisition or retraining. Using
help with: familiar analytical tools in a compliant user environment,
System requirements and design Experian Analytical Sandbox empowers analysts to:
Bureau data feeds (defining data elements, frequency
and sourcing) Link in-house applications data with credit information
in a depersonalized manne
Data linkage, depersonalization and compliance
Industry-use cases Research and analyze market trends
Advanced analytical resources via: Validate and expand acquisition, risk and
Experian DataLabs Our data scientist experts in Big Data marketing strategies
systems and analytics are versed in handling seemingly Conduct-wallet share and benchmarking analysis
impossible data sets and transforming information into
actionable knowledge.

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