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In the financial technology world, collecting the right information is critical. Even though big data is often heralded as the best way to optimize financial services, smart data — which describes “data that has valid, well-defined, meaningful information” — is positioned to play a huge role in the future of the FinTech industry, according to an article in Inc. Magazine. For some enterprises, large volumes of data are still needed, but over time, the emphasis on meaningful data is likely to win out.
Smart Data Versus Big Data
There is a significant difference between collecting piles of data and finding relevant information that can be used immediately. Generating critical information to create profiles and project customer behavior are what makes big data so appealing to FinTech companies. But it’s important not to lose track of the validity, quality and usefulness of the information. Big data is associated with a lot of “noise” that needs to be canceled out.
Smart data, on the other hand, offers a more valuable proposition. Solving business problems hinges on the availability of information that’s clear and that can be used immediately. As is the case in nearly every business sector, quality trumps quantity every single time. Tackling the precise pain points of a business model requires a gentle and smart approach, rather than brute force and sheer volume.
Identifying the Relevant Information
Four main components define the usefulness of aggregated data: data volume, which refers to the generation process; data velocity, which relates to how data is captured and stored; and data veracity and value, which are determined by the usefulness of the information collected. In all of these four segments, smart data trumps big data in its current form.
Regardless of which approach a company takes, analyzing the information collected is mandatory. Weeding out the irrelevant data is a daunting task when relying on big data. Amidst all the clutter and useless statistics, the hidden key to solving a particular problem is all but impossible to find. Unfortunately for big data aggregation, an increase in volume leads to a decrease in usefulness.
Put another way, big data isn’t capable of becoming smarter over time. Similar to how machine learning and artificial intelligence behave, a different type of information gathering needs to be used moving forward. Archiving trends, patterns and even anomalies will become possible when aggregating information in a smarter way.
Creating a Personalized User Experience
Collecting big data can also be seen as an invasion of user privacy. Among the metadata collected are sensitive details that may or may not be used by individual companies. Moreover, the vast jungle of information can make it harder to come to a correct conclusion. Particularly in the lending world, moving away from big data is a beneficial option. The majority of financial services firms want to offer a personalized experience for their clients. Enterprises should only gather the information needed to create a hassle-free experience for the end user — anything beyond that is useless noise.
Collecting and analyzing data is playing an increasingly important role in a number of industries. Find out here how technology is helping data-driven marketing gain momentum.