How Analytics Is Transforming Finance

December 14, 2022

Industry leaders are exploring how analytics is impacting the finance industry, creating opportunities and new challenges. In a recent discussion referred to as the analytics of finance, representatives stated the risk of potential new frauds and that if regulators fail to embrace analytics in the future, fraud cases will get bigger, persist for longer and be more challenging. According to financial leaders, some of the biggest fraud cases happen due to complexity, and financial markets are getting increasingly complex.

The discussion explored the importance of analytics, AI and Machine Learning as providing valuable pathways for solutions to every challenge faced. Investing in technologies like analytics is one of the most effective ways to tackle financial crimes. JP Morgan invests $12 billion every year in technology, and the entire financial sector may have a total annual outlay in the region of $100 billion. The critical area to focus on is efficiency, which means embracing data and analytics to determine potential barriers or challenges. 

As financial crimes become more sophisticated and challenging to detect, regulators appreciate the power of analytics and are embracing new technologies. Recognition of these tools is moving into education, with more institutions training for data and quantitative analysis. The use of analytics in finance has also delivered other benefits, such as growth and new efficiencies to markets and increased access to financial products, levelling the playing field for others. Analytics has a valuable and growing role beyond its traditional focus. On the high street, we see more efficient capital budgeting due to data utilisation. In households, we’re experiencing better budgeting, retirement savings and credit usage due to the democratisation of data, innovation and fintech. Within capital markets, analytics is exploring new uses, such as machine learning to develop predictive business models. Data and predictive models are being utilised for due diligence in mergers and acquisitions and capital-raising activities. Practitioners have seen positive results in terms of better accuracy and improved benefits to shareholders. Analytics could provide critical to meeting ESG values. Analytics with satellite monitoring could tackle greenwashing, and technologies like infrared imaging could monitor and verify emissions at various units. These methodologies would support investors assign capital to businesses embracing their values. 

Finance leaders explain that we need to consider data and analytics as an investment. Looking toward the future, the top challenge for analytics is related to data ownership, where people can control their personal information. On the other side, analytics will create innovative, custom financial planning for people at better costs, helping individuals make more informed decisions. Businesses, small and large, will also find more uses for analytics in other areas like capital budgeting and resource allocation. 

In a progressive field like analytics, it’s vital to determine between technology-related and human failures. To begin with, informed individuals that understand the technology, data and analytics make a huge difference. 

Written by:

Connect with :

Recent News & Insights