How FinTechs are Using Big Data to Gain a Competitive Advantage Against Traditional Banks
FinTechs Outsmart Banks with Big Data
In the last few years, FinTech companies have been disrupting the banking and financial service firms. FinTechs are using Big Data and Predictive Analytics to compete with these once highly concentrated industries. Predictive Analytics is the use of Big Data to hypothesize future behavior. When applied to the FinTech industry, Predictive Analytics is a powerful tool that generates a risk profile, gaging how likely a customer is to pay back a loan. As a result, FinTechs are able to make better lending decisions and avoid bad debt expense.
FinTechs are mining through internal and external data to develop a risk profile of customers requesting financing. They look at past financial data such as what customers are spending their money on. They also look at lifestyle decisions to assess whether it is likely that the customer will repay the loan. The risk profiles extend beyond the capacity of traditional credit scores. Customers with a higher risk index receive a higher APR or are denied a loan; customers with a lower risk index save money through better lending terms.
Simply collecting scores of data is not sufficient to generate a risk profile. FinTechs must then analyze that data and make sense of it. NeuroChain’s algorithms make accurate predictions and asses a customer’s risk. With NeuroChain’s technology, a smart lending decision can be reached in seconds. As a result, FinTechs save millions by avoiding individuals who cannot repay the debt.
Big Data is also helping FinTechs acquire new customers, as well as retain customers by offering a better customer service experience. By combining Big Data with Machine Learning, FinTechs are able to identify and resolve fraudulent transactions. Customers don’t like when their money is stolen. Big Data is analyzed to create a habitual spending profile for each customer. Machine Leaning can identify when a transaction is out of the typical day-to-day spending. FinTechs can immediately send a confirmation to the customer’s phone for him or her to approve or deny the transaction. Customers are more likely to stay with a company who can keep their money secure.
As a result of Big Data and Predictive Analytics, FinTechs have been able to gain a competitive advantage on banks by reducing lending risk and offering a better customer experience. Big Data and Machine Learning will continue to revolutionize the financial services industry.
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