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Big data has the power to transform the financial industry

Richard Jones Archive

There is certainly a place for data quality in the financial sector. Banks, investment firms and other financial institutions can reap the benefits of compiling accurate information about their clients and the economy at large. The more data they have, the better equipped they are to predict market trends and make sound financial decisions that will positively impact their futures.

While big data has already made tremendous strides, there is still more progress to be made with the technology in the financial sector. Here are a few improvements that could add efficiency and integrity to finance in the years ahead.

Growing data sets
According to Neil Palmer, a data analyst with SunGard, corporations are still looking for larger sets of market data in order to gain greater historical perspective on long-term financial trends. The more data they have, the more granular their picture of the financial climate will be. They can use additional information to build more accurate predictive models and forecasts of how trade will progress on any given day.

Dealing with "flash crashes"
According to CNBC, financial market regulators are struggling with the effects of high-frequency trading. Specifically, they're worried about "flash crashes" - rapid downturns in financial markets that aren't always predictable or manageable. Sometimes, these crashes happen when large volumes of trading result from major news events, including terrorist attacks, natural disasters or media scandals like the Associated Press' fake tweet about President Barack Obama. But in other cases, they're more predictable, given the traditional ebb and flow of markets, and corporations can use more data to anticipate and adjust for these downturns.

Using big data responsibly
Another issue is making sure financial executives use data ethically. CNBC explains that there's a huge potential for interference in markets, as agents can use data for reckless endeavors such as adding selling pressure to a dwindling market to artificially drive up numbers. Some lawmakers have suggested creating real-time indices that track this behavior and prosecuting those who repeatedly violate the rules of business ethics.

It's unclear exactly what rules should govern the use of big data in finance, but general consensus will likely hold the answer. By engaging in healthy dialogues about ethical use of data, banking executives can craft a set of guidelines that will ensure a strong future for the industry. Data can make banks more efficient and ultimately more profitable, but responsibility is a must as well.

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