How Fintech companies are using Data Analytics?
Fintech or Financial Technological companies have disrupted the traditional banking system in a good way. Even if you’ve not heard about the term Fintech, the chances are you might’ve used Fintech services. Fintech is the technology applied to the standard financial activities or services.
With the introduction of mobile payment, chatbot for customer service, application for stock-trading & budgeting, Fintech services have changed the way of banking. While improving financial activity, the Fintech companies have leveraged many technologies like AI, Machine Learning, and the most important technology of all, the Data Analytics.
Data Analytics plays a crucial role in Fintech companies as they have an abundance of customer’s personal and financial data. Fintech companies are more and more relying on Data Analytics for their financial decision making and to provide excellent solutions. Let’s see how Data Analytics plays a crucial role in Fintech companies.
Fintech companies are mainly consumer-focused. With the financial and personal data from the customer, they do customer segmentation for providing better service. Segmentation of customers has been used in the traditional banking system too. They segregate the customer based on their age, gender, economic status, location, etc. By grouping the customer, the financial companies can target their services according to the group.
Along with the traditional method of grouping the customer, Fintech companies use data analytics on their customer financial data to group the customers based on their value. They predict the customers who are likely to spend more based on their financial data using Data Analytics and target specific services to them. By promoting their products or services, the Fintech companies can retain their users or gain new users based on their financial profile.
Identifying fraudulent transactions is a big problem in the financial industry. But with the help of Data Analytics, the problem cannot be completely mitigated, but it can be reduced. Traditionally, identifying a fraudulent transaction has to be done manually. But the Fintech companies use Data Analytics to create a profile on the customer’s financial transaction. With the profile, they can understand the customer’s spending habits and can easily find when unusual activity occurs in their account.
Fraud detection in the financial industry has been improved vastly by Data Analytics. Users get a notification when unusual activity occurs in their account automatically. It has been the main reason for the customers’ trust with Fintech companies.
Another area where Data Analytics is heavily used is Risk Analysis. Credit scoring companies like Equifax, Capital One, etc are using the Data Analytics algorithm like linear regression, logistic regression, etc to find out the risk of customers borrowing money based on their historical data. They update the customer’s credit score based on the previous result and the predicted result by using the analytical algorithm.
The Fintech companies analyze the risk for each customer before lending them the money. Thus Fintech companies gain majorly by avoiding lending money to bad customer’s which is a major problem in traditional banking.
Better Customer Experience
Fintech companies deploy various techniques to improve the user experience. They predict the customer’s need based on analytics and provide them with the services tailored for them. By using predictive analysis, the Fintech companies can also give personalized recommendations to the customers to save their money. Fintech companies deploy various analytical techniques for catering to the need of customers. It makes them far more delightful to use for a customer than a traditional banking service.
Technology is growing at an accelerated pace. The companies that use modern technology in providing services are faring much better than the traditional one. Especially in the financial industry, Fintech companies like Paytm, Square, Google Pay are now more popular and also, the preferred way of using among the people. The main reason for this trend is because of Data Analytics. With data growing faster than ever, Data Analytics is going to make more strides in the financial industry.