The data

gold rush
Companies need
the right models
and capabilities
to monetize data
Contacts

Boston Düsseldorf Sydney

John Plansky Peter Gassmann Vanessa Wallace

Senior Partner Partner Senior Partner
+1-617-521-8801 +49-69-97167-470 +61-2-9321-1906
john.plansky peter.gassmann vanessa.wallace
@strategyand.pwc.com @strategyand.pwc.com @strategyand.pwc.com

Carl Drisko São Paulo Peter Burns

Partner Partner
+1-617-521-8809 Roberto Marchi +61-2-9321-1974
carl.drisko Partner peter.burns
@strategyand.pwc.com +55-11-5501-6262 @strategyand.pwc.com
roberto.marchi
Jamie Solomon @strategyand.pwc.com
Senior Executive Advisor
+1-617-521-8800
jamie.solomon
@strategyand.pwc.com

2 Strategy&
About the authors

John Plansky is a senior partner with Strategy& based in Boston. He

specializes in IT strategy, large-scale transformations, and cost fitness
initiatives for financial-services firms. He leads the North America
digital business and technology practice for Strategy&.

Jamie Solomon is a senior executive advisor with Strategy& based in

Boston. He has 35 years’ experience in business and technology for
financial-services firms, focusing on the monetization of data assets.

Rebecca Karp was formerly a principal with Booz & Company based in
Boston.

Carl Drisko is a partner with Strategy& based in Boston. He leads the

firm’s financial-services IT architecture team and specializes in the
architecture, design, and implementation of large mission-critical
applications.

This report was originally published by Booz & Company in 2013.

Strategy& 3
Executive summary

Few financial firms recognize the value of their data. One reason is
the newness of the technology. Only recently has it become possible to
mine in such quantity this fine-grained information about costs, profits,
operations, supplier practices, and (most important) customer behavior.
But though the opportunity is new, there is no time to waste. Strategy&
estimates that the revenue from commercializing data will be US$175
billion in 2013 and will ramp up to $300 billion per year in the next
three to five years across capital markets, commercial banking,
consumer finance and banking, and insurance. That kind of opportunity
is going to attract interest from many quarters, and financial firms can
expect to see nontraditional players trying to muscle into the space.

To seize the opportunity, leaders of financial-services companies must

first pick an appropriate business model for an enterprise-wide data
and analytics transformation strategy. This report identifies five basic
business models for using data profitably and effectively. They range
from improving your current core business to offering entirely new
products and services.

No matter which of these models a company chooses, there are

five core design principles that it must put in place to pursue a data
transformation strategy: understanding its customers, getting to know
its data, understanding the value chain, sizing the value, and enhancing
the infrastructure.

4 Strategy&
Data is a valuable asset

Opportunities can hide in plain sight. Consider, for example, the data
available to financial-services firms about their customers’ behavior,
their suppliers’ practices, their costs and profits, and their own
operations. Data of this sort is so abundant that it is often overlooked.
Its growth is so exponential that the companies are unprepared. Its
operational challenges are so daunting that many financial-services
companies fail to recognize that data is also one of their most valuable
assets. In the next five years, fortunes will be made and lost based on
which corporate leaders can grasp this fact; reorient their approach;
initiate enterprise-wide, data-led transformations; and effectively
monetize this new type of asset.

But how do you get there? A financial-services company can take

advantage of the data gold rush through a three-phase transformation.
These phases can occur sequentially, but in some well-designed
initiatives, they occur in parallel and reinforce one another’s impact.
The transformation includes the following phases:

1. Process-led transformation: standardizing and simplifying the

front- and back-office processes to be best in class, while focusing
operations on the most valuable parts of the business

2. IT-led transformation: using digitization and emerging technologies

such as cloud computing and machine intelligence to automate
delivery of products and services and create straight-through
processing

3. Data-led transformation: monetizing data assets, integrating

outside data (perhaps from adjacent industries, new partners,
or unstructured data sources) with internal information, and
developing analytics to gain powerful insights into customer
behavior and supplier capabilities to create new products and
services

Strategy& 5
This report describes the design and practice of data-led transformation
and the monetization of data assets. The value of this opportunity for
any financial-services firm can be enormous. Strategy& estimates that
the revenue from commercializing data and analytics will be US$175
billion in 2013 and will ramp up to $300 billion per year in the next
three to five years across four key areas: capital markets (accounting
for 30 percent of this potential revenue), commercial banking (20
percent), consumer finance and banking (35 percent), and insurance
(15 percent). For many financial-services companies, this will be a
game-changing move, allowing them to move beyond enhancing core
offerings and enter new industries, reach new customer segments, and
drive revenue, profitability, and higher valuations (see Exhibit 1).

Recent technology advancements, regulatory developments, and

consumer habits are all converging to set the stage for this opportunity.
On the technology front, mobility and connectivity allow companies to
know where customers are at any moment and to market more easily to
individuals, providing such personalized services that they reach the
“segments of one.” Meanwhile, cloud computing, Hadoop (an open
source software project that enables the distributed processing of large
data sets across clusters of commodity servers), machine intelligence,
and other technologies allow companies to process vast quantities of data
in real time (or very near real time) and to integrate external structured
data, along with internal and external unstructured data, with their own
internal structured data. For example, imagine the power of correlating
keyword searches and global news mentions, which are both
unstructured data sources, to a momentum-trading strategy.

Exhibit 1
Financial-services estimated data monetization market size

Consumer finance Commercial Capital

Insurance and banking banking markets

$26M $61M $35M $53M

Total estimated market = US$175M Source: Strategy&

6 Strategy&
In the regulatory arena, new oversight requirements since the financial
crisis have expanded the categories of data that financial-services firms
need to manage, process, and disseminate. For example, new capital
and risk analytics will be required to efficiently manage Basel III and
Dodd-Frank.

Finally, consumer habits and expectations are changing rapidly, driving

some consumers to switch their banks and insurance providers. Social
sites such as Facebook, Twitter, and Pinterest have whetted people’s
appetite for more comprehensive information, and retail sites such as
Amazon and eBay are broadly influencing customer experience
expectations. Google and eBay are quickly entering into the payments
space, demonstrating how nontraditional competitors can enter the
landscape via a data advantage.

The end result for the industry will be a new group of high-margin
business opportunities. This is good news for the industry as a whole,
but it is also likely to attract outside firms with expertise in monetizing
data. Think of PayPal and Google Wallet as the first of these new
competitors. Companies from the computer industry could easily give
some established financial firms a run for their money. Strategy&
estimates that leading financial firms risk losing 10 percent or more of
their potential top-line revenue to nonfinancial competitors within the
next few years if they do not move aggressively to transform the
enterprise today.

Strategy& 7
Five basic business models

The first step in seizing the opportunities of data monetization is

picking an appropriate business model for your data and analytics
transformation strategy. There are five basic models — five ways to use
data profitably and effectively (see Exhibit 2). Together they make up a
spectrum of activity for transforming your approach to information:

• Your current core business, improved through use of enhanced data

• Better return on your marketing investment using insights about

your customers or transactions

Exhibit 2
Data and analytics transformation spectrum

Enhance current business Enter adjacent businesses Develop new businesses

Leverage enhanced White-label

data for core Generate new capabilities & Create new data Create new offerings
business insights infrastructure

– Seek opportunities to – Understand deep client – Monetize existing – Partner with adjacent – Develop new sets
enrich existing service insights analytics capabilities via players across the of analytics and
through new data white labeling to clients business value chain data products (e.g.,
– Enhance marketing
sources and other partners benchmarks, tools)
campaign ROI and – Identify new sources of
across the value chain
– Develop and leverage conversion data (e.g., unstructured) – Develop new products
new platforms – Commercialize to join with existing data that benefit from
infrastructure to sell sets enhanced data and
– Deliver enhanced
platforms as a service analytics (e.g., real-time
services (e.g., in real – Monetize new sets
net asset value, active
time) of data
non-disclosed exchange
traded funds)

Source: Strategy&

8 Strategy&
• White-label capabilities and infrastructure delivered by other firms

• Delivery of new types of data directly to customers

• New products and services made possible by data and analytics

All these business models will generate incremental revenue. However,

some are more transformative than others — in other words, they are
more likely to reshape your business overall. Financial-services firms
that are creating new data and developing data and analytics products
are truly evolving into something more like a technology business. They
may even start to enjoy the higher valuation multiples associated with
technology and data firms.

Corporate leaders can ask themselves a series of questions to

understand where they would best fit on the data and analytics
transformation spectrum:

1. Does my firm have a strong product set but limited conversions,

cross-sells, or marketing results?

2. Do I own the market in key categories but have trouble enticing

customers with new products?

3. Do customers need my products in real time or integrated with

common industry platforms?

4. Is my firm’s accessible data robust? For example, do I see 20 percent

or more of the industry’s transactions or volume?

5. Can I partner with others to improve the quality, value, and delivery
of my data?

6. Can I use data to develop products and services in adjacent or new

business sectors?

The answers to these questions will help a company identify the

best business model for its data and analytics transformation strategy
(see Exhibit 3, next page). Frequently, companies will pursue more than
one of these models to reach various customers and address different
needs.

Strategy& 9
Exhibit 3
Data and analytics transformation dimensions

Leverage
White-label
Key questions enhanced Generate new Create new Create new
capabilities &
data for core insights data offerings
infrastructure
business

1. Does my firm have a strong product set but limited

conversions, cross-sells, or marketing results?

2. Do I own the market in key categories but have

trouble enticing customers with new products?

3. Do customers need my products in real time

or integrated with common industry platforms?

4. Is my firm’s accessible data robust? For

example, do I see 20 percent or more of the
industry’s transactions or volume?

5. Can I partner with others to improve the

quality, value, and delivery of my data?

6. Can I use data to develop products and

services in adjacent or new business sectors?

Source: Strategy&

10 Strategy&
Case study: Equifax

On the surface, Equifax is a company into adjacent businesses based on its

that sells data and enriched data in access to income and employment data
the form of credit scores and ratings from more than 200 million employee
to risk managers, marketing officers, records. For example, Equifax’s
compliance heads, demand managers, Suspicious ID product provides real-time
and the like. It is also an anomalous fraud monitoring capabilities across
success; its stock price has risen by 50 the company’s network of financial
percent over the past two years, more institutions as well as related industries,
than double the growth of the S&P 500. a big improvement over the existing
What sets Equifax apart is its ability to periodic report. Equifax is also focusing
develop business opportunities across on tailored solutions. Its Analytical
the entire data and analytics spectrum. Sandbox product blends Equifax data
and analytics with data and analytics
Like many financial companies, Equifax from a specific customer to conduct back
interacts with a large and diverse set of testing and scenario testing.
data assets: customer wealth, fraud and
authentication, securities compliance, The company’s ability to develop
telephone and utility exchange, and products and services across the entire
income and employment data. It data and analytics spectrum is clearly
already has a presence in each of the driving growth. In fact, Equifax predicts
five business models, with its core multiyear growth of 7 to 10 percent
business positioned on the far right (with acquisitions), including 2 to 3
of the data and analytics spectrum. percent growth fueled by new products
Most recently, Equifax is expanding and innovation in data and analytics.

Strategy& 11
Design principles

No matter where your company currently sits on the data and analytics
transformation spectrum, one goal should be to fill in areas of the
spectrum you don’t currently occupy. This typically means moving to
the right, where new data and new offerings can yield new business.
There are five core design principles that companies must have in place
to pursue such a data transformation strategy.

Understand your customers: Continually learn about and manage

customer needs, a process that should include a deep segmentation
analysis to unearth customer requirements and preferences. This goes
beyond enhancing products and services to fill unmet needs. It means
understanding the delivery and integration models that clients require
in order to benefit from those enhancements. In other words, it’s not
enough to offer a useful product; the company must also deliver data
using tools and platforms that customers can easily integrate into their
advisory platforms, trading platforms, analytic desktops, order
management systems, middle-office systems, and back-office systems.
For example, a tool to help investment managers understand fund flows
needs to integrate into their systems in real time to be useful at the
point of sale.

Get to know your data: Catalog and map data housed across all
business lines to develop an enterprise-data taxonomy and identify
opportunities. For example, one capital markets firm mapped its full
range of data and analytics capabilities and channels to identify those it
could use to build new products and services. The firm then prioritized
those data sets, favoring the ones with the most immediate promise. For
instance, it built a new business generating intraday risk measurements,
combining its capabilities in investment risk management and its
enhanced data storage capacity. This was linked with proprietary data
that, in combination with outside data, generated additional product
opportunities, such as an intraday risk analytics tool kit.

Understand the value chain: Develop insights into partners and

competitors across the value chain, including upstream suppliers and
other partners of your clients, paying particular attention to where

12 Strategy&
Case study: Tesco

U.K.-based supermarket giant Tesco is a Clubcard point for every £4 (US$6.12)

prime example of a nonfinancial company spent. Clubcard customers can also receive
that’s using data to compete effectively preferential deals when buying Tesco Bank
with traditional financial players. Until products — including discounts on car,
2008, the company ran Tesco Bank as a home, pet, and travel insurance — and can
50/50 joint venture with the Royal Bank use points to buy Tesco Bank insurance.
of Scotland. That year Tesco bought out This year, Tesco Bank gave customers
RBS and began developing a completely around £70 million (US$107 million)
new infrastructure for the business, worth of points to spend in the store or
built a new team, and brought in new on Clubcard rewards. In terms of systems
expertise. The transition was not always and IT, Tesco’s new platforms significantly
smooth — for instance, online customers improve customer service. Instant decisions
were locked out of accounts for several are now possible on loan applications,
days in 2011 when Tesco moved data and customers can open and fund savings
from the RBS systems to its own — but accounts in just 10 minutes rather than the
it’s now complete. To fully exploit this two weeks required in the past.
treasure trove of data, the company took
a significant stake in Dunnhumby, a U.K. The conversion is still in its early days,
data mining firm that will help Tesco but Tesco’s efforts are paying dividends
monetize the consumer data from both in the form of increased market share
the retail and banking operations. across a range of products. In 2009, Tesco
Bank credit cards made up 9 percent
At its core, Tesco Bank is underpinned by of all MasterCard and Visa credit card
the Clubcard. The insights the bank gains transactions in the U.K., and by 2012
from the Clubcard customer data allow that figure had grown to 12 percent.
the company to understand customer Meanwhile, from 2008 to 2012, the
needs and make the most relevant offers company’s car insurance gross written
in the store and in the bank. The Clubcard premiums increased by 39 percent and
credit card rewards customers with points pet insurance gross written premiums
whenever they use their card — one rose 44 percent.

market adjacencies offer new opportunities to leverage your data.

For example, by understanding how merchants interact with order
management system vendors, a payments company can identify
potential partnerships and opportunities for its data. One merchant
might benefit from a better understanding of segment-specific demand
patterns; another might benefit from understanding sales volume by
time of day. To identify these relationships and opportunities, it’s
helpful to map the data ecosystem to see your adjacent relationships,
as well as those relationships’ adjacent relationships, and so on.

Size the value: Understanding the market opportunity for

commercializing data is a key design principle. Each of these business
models can yield a substantial internal rate of return; indeed, each of
them can be self-funded with the right design. One reason is that

Strategy& 13
investing to digitize your business can save 25 to 35 percent in
operating costs. To size value, you need to understand your competitors
and your own key inputs — such as the various costs — as well as the
marketplace demand for the data products.

Enhance the infrastructure: At the foundation of the data strategy must

be an information technology infrastructure that is sophisticated,
transparent, and flexible enough for a company to unlock the value of
its data. At a minimum, the infrastructure needs to provide single
sources of data truth, real-time data for messaging and transactions that
can be monetized (even without additional analytics), and a highly
available infrastructure.

These five core design principles should guide your practice as you
design and execute your strategy for monetizing data. You will invest
and manage a host of new activities (see Exhibit 4). They will enable you
to build the capabilities you need for the data gold rush.

Exhibit 4
Building capabilities for the data gold rush

Investment in - Invest in continuous learning and management of clients’ or customers’ unmet needs across the value chain.
continuous - Truly understand the delivery and integration models that clients require to benefit from enhancements to
improvement products or new products and services.

Cataloging & - Understand, catalog, and map data housed across all business lines.
mapping - Map data and analytics services across business units to understand what types of capabilities can be
existing data leveraged to build new products and services.

Developing - Determine additional opportunities across the value chain by developing insights into adjacencies, for both
insight data and partners.
adjacencies
- Create a comprehensive view of the data ecosystem.

Combining - Combine “internally owned” structured data with both internal and externally sourced semi-structured and
structured & unstructured data, market data, telemetry data, etc.
unstructured data
- Seek out opportunities to enhance the core business or develop new products and services.

- Put in place a data infrastructure that can provide the necessary foundation to enable the organization to
Building data unlock the value of data assets.
infrastructure
- Continue to evaluate core capabilities to determine what suits the particular situation best.

Source: Strategy&

14 Strategy&
Conclusion

Most financial-services companies still don’t think of their data as an

asset they can monetize if they build the right capabilities. They’re
overlooking an opportunity in plain sight. Not only can they make
better use of their data to enhance products and services for current
clients, but new technologies now allow them to take the next step and
combine their data with external data. This marriage will create
powerful new insights into the customer and supply base and could
transform the enterprise, unleashing a whole new generation of high-
margin products and services for current customers and customers in
adjacent markets. The enormous revenue potential will not go ignored
by others. If financial-services firms don’t embark on data-led
transformations to seize this opportunity, more nimble nonfinancial
players surely will.

Strategy& 15
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This report was originally published by Booz & Company in 2013.

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