HOW TO MAKE THE MOST OF THE DATA REVOLUTION
NIGEL DOBSON, BANKING SERVICES LEAD & LEIGH MAHONEY, HEAD OF WHOLESALE DIGITAL, INSTITUTIONAL, ANZ | MAY 2019
While governments are increasingly using analytics to improve the lives of citizens it is business that has so far benefitted most from the data revolution.
A small band of ‘digital-first’ companies with a combined value of $US4 trillion stand out: Amazon, Apple, Facebook, Google and Microsoft, each wielding data to powerful and successful ends.
As this revolution gathers momentum, ‘physical first’ companies – the overwhelming majority globally – will need to learn from the success of the digital-first groups as they look to leverage data and monetise it.
While the challenges for organisations are many, there will also be many opportunities for them as the data economy evolves.
Creating and retaining competitive advantage will increasingly mean leveraging data to make strategic decisions, improve operational efficiencies, and drive sustainable growth and innovation.
The scope of this advantage can’t be overstated. With every swipe, click, like and search data is created - to the tune of 2.5 quintillion bytes every day. By 2020 an astonishing 1.7 MB of data will be created every second for every person on earth.
McKinsey estimates better access to, in particular, open data could help unlock $US3 trillion to $US5 trillion in global economic value.
The European Commission believes in the EU alone the data-driven economy had a value of almost €300 billion in 2016 and it will more than double by 2020.
In commercial terms few could dismiss the importance of data; fewer still could deny competitive advantage awaits organisations able to quickly access, integrate, refine, analyse and share data.
But unbounded data analytics is being met by regulatory forces acting to protect citizens, such as the
EU’s GDPR, Australia’s Consumer Data Right and Singapore’s Personal Data Protection Act.
These laws are empowered to penalise organisations that do not compliantly manage data. Fines for breaches are massive and serve as a significant disincentive for firms seeking to engage with data.
The commercial value of analytics is reaching new highs but the consequences of getting it wrong have also increased. This has led some organisations to adopt a more conservative approach.
“Competitive advantage awaits organisations able to quickly access, integrate, refine, analyse and share data.”
It is also unhelpful for many firms that siloed data has created enterprise-wide divisions. In the banking sector, where data management is characterised by high levels of privacy and security, the self-erected barriers of silos and segmentations can lead to suboptimal performance.
For many banks the notion of providing value by using analytics to help customers gain a deeper understanding of their own and their competitor business activities is a key differentiating factor.
Indeed, for all regulated institutions, getting accurate data into the hands of the right customers in a manner that is timely, secure and compliant is vital. The imperative for banks and corporate clients to find quick answers to some of their most pressing business concerns is leading to the deployment, or at least the consideration of real-time technologies.
The rise of the new data economy is made more complex by a simultaneous shift of focus from data about ‘things’ – metrics describing the movement of goods or money – to data about people.
As the focus shifts, access to cloud-based data solutions and huge computing power is delivering some highly articulate results. But concerns are rising around privacy and accuracy of the data held.
Indeed, there is increasing general discomfort around organisations forming and acting upon deeper data analytics derived insights into individuals. The opportunities for organisations to push the boundaries of what is acceptable here are a constant reminder technology leads and regulation lags.
It’s a new frontier and those who are accountable for delivering the insights have a responsibility to get it right.
Of course, availability of technology is not always followed by its adoption. In this respect, the utility corporates can gain from data, either created in-house or imported from third parties, largely correlates with an organisation’s technological capacity and willingness to invest. The current degree of variance in technological uptake is noteworthy.
The Australian mineral and energy resources sector is particularly well-evolved in terms of technology and use of data. Many other sectors are just beginning their journey towards optimising data usage. These players are not necessarily laggards and there is a correlation between sectoral appetite for data analytics and the sensitivity of the data held by the sector.
The highly asymmetric risk faced by companies holding sensitive data – especially given new regulatory power – has the effect of curtailing their desire to move too far ahead of the rule book.
These businesses are as interested in being trailblazers as any other, but the consequences of non-compliance with data regulations can be severe.
As such, most ensure investments in the area of leveraging personal data move strictly in alignment with the industry and the law, but - as mentioned earlier, technology leads and regulation lags, so it is perhaps inevitable that they appear to be slow on the uptake.
The development of open banking is also driving further awareness of the value of data. Increased adoption of IoT is also shifting market dynamics. This is a technology capable of generating vast amounts of highly specific data on even the most niche areas of consumer life.
This is changing the dynamics of the relationship between data subject and data holder but it is also helping to construct a solid framework of understanding for the digital age, enabling the next wave of innovation to push ahead – and businesses to leverage the new data economy in safety.
With 5G networks rolling out across the world, the capacity of data transmission is mounting. This is empowering all stakeholders and giving rise to new sources of data. In the future data economy machine-to-machine communication could be amongst the most powerful.
Whether it’s for autonomous vehicles on the roads, automated medical procedures or a host of other possibilities, improvements in data transmission could open up industries where precision-machinery communicates in ways that, today, we can only dream of.
The nature of machine-to-machine data transmission may have a huge impact on the nature of commercial models and economies in general. As cutting-edge solutions become commonplace it will impact core commercial activities such as payments and collections. With real-time data, the rise of fractional or micro-payments begins to emerge.
Treasury tends to think in terms of end-of-day batch payments. But where the transmission method increases in velocity, so too does the data flow. This will lead to a profound change to the way commercial entities operate.
Indeed, instant automated micro-payments could be made to suppliers based on devices sharing job completion data, potentially several times a day. With confirming transactions taking place at near-instantaneous speed, the velocity of commerce increases in parallel. Batch processing may be fine for now but the positive implications of real-time data exchanges for treasurers are significant in terms of liquidity and working capital management.
With the increasing speed of networks and data transmission, the power of data – and thus its value and price – becomes inextricably linked to the solution providers capable of transforming data to solve real business challenges.
However, rather than acquiring data assets or implementing a broad-sweep approach to the new data economy, corporates would be wise to adopt a focused ‘use-case’ approach.
The final high-level consideration is data distribution. This means getting the insight to the right place, at the right time, in the right format and in a secure and governed way.
For use-cases to succeed and for businesses to engage successfully with the new data economy, it becomes incumbent upon each function to identify and understand their particular challenges or goals before deciding on the scale of investment.
At this point, it is advantageous to work closely with external partners, particularly relationship banks who can offer a wide-angled view of the environment.
As the data economy gathers momentum, competitive advantage will be found by businesses capable of leveraging internal and external data. Indeed, when it comes to making effective strategic decisions, driving operational efficiencies, and ensuring sustainable growth and innovation, access would appear to be vital.
Nigel Dobson is Banking Services Lead & Leigh Mahoney is Head of Wholesale Digital, Institutional at ANZ
A version of this article originally appeared on Treasury Today.
RELATED INSIGHTS AND RESEARCH
A new way for business to learn
Machine-learning algorithms are helping businesses solve big problems and driving productivity returns.
Every industry is ripe for disruption – but businesses can make moves to keep ahead of the pack, experts agree.
Institutional Term Loans taking off in Australia
Australian corporates are increasingly tapping Australia’s superannuation funds and institutional investors for longer-dated loans and to diversify their funding sources away from the bank market, paving the way for a slow evolution of a direct lending market.