Developing the “Moneyball Advantage” in Banking
Turning Big Data into a Competitive Differentiator
By Dr Aaron Sum, Alliance Bank Malaysia Berhad
(Presented at the Asian Financial Services Congress, Feb 23 - 24 2012, Marina Bay Sands, Singapore, Organized by IDC Financial Insights)
Introduction and Synopsis
The rapid growth of data in recent years, commonly referred to by industry observers as the “Big Data” phenomenon, presents both opportunities and challenges. As companies seek to manage, analyze and harness the insights from these substantially larger sets of data, they are not only confronted with the growing volume of data from their existing applications, but are also faced with new varieties of unstructured data such as those from social networking tools and mobile technologies. Furthermore, the rate of change of new data formats over the past 5 years has been unprecedented. The amount of global data is now projected to more than double every two years, with new sources such as Facebook generating 30 billion pieces of content every month (1). In financial services, a similar trend prevails; there are now 10,000 payment card transactions per second globally. In 2010 alone, 210 billion electronic payments were generated worldwide, and this is projected to double by the end of the decade (2).
In the book “Moneyball” (now popularized via the movie of the same name), the author Michael Lewis recounts how the general manager of Oakland Athletics (a baseball team in California) used statistical analytics to find undervalued talent to take on teams like the New York Yankees. Lewis details how statistician Bill James showed that people overlooked the information that would reveal which strategies would be most effective to compete and win in baseball. The central premise of Moneyball is that the collected wisdom of baseball insiders (including players, managers, coaches, scouts, and the front office) over the past century is subjective and often flawed.
As seen from “Moneyball”, analytics, when harnessed to its full potential, can serve to ‘level the playing field’ and enable even the smallest industry players to take new ground and win market share.
Given the current climate of protracted slow growth and “hyper competition”, analytics is a key to uncover growth and optimization opportunities. In this context:
• How can financial institutions effectively leverage big data analytics to develop the “Moneyball” advantage?
• How would banks use big data to find new revenue streams, maximize sales effectiveness, optimize costs and even forecast market trends?
• What key steps should banks take to build their analytical capabilities?
The conference paper addresses the key issues above and shows the path that banks can take to generate competitive advantage and tangible business value via the application of hypotheses-driven analytics.