The growth of analytics represents a data-flavoured gear shift (one of the many) in financial services.
AI-powered user-centric product development, real-time risk prediction, and a host of other hyphenated terms have confirmed data’s starring role in financial innovation.
Analytics takes product personalisation to a new level, heating up competition in the process. It’s something customers have come to expect (53% of them, according to a study from MX), and firms are racing to deliver it.
How does this impact the industry? From the talent market to the regulator’s desk, Trust in SODA's data recruitment consultants explore in more detail below.
Hyper-personalised, predictive financial guidance
Predictive analytics, modelled on historical individual user data, can be used to identify patterns and detect deviations in financial behaviour, which makes room for some truly innovative products.
This includes personalised budgeting insights, portfolio monitoring, and savings recommendations, to name a few.
It’s worth noting that North American banks are leading the charge here, occupying seven of the top 10 spots in Evident’s latest AI index. That said, the emergence of increasingly powerful tools has created space for the traditionally more agile FinTechs to compete.
o Challenge: Data privacy. As we discussed on our recent Women in Data Podcast, customers need to trust whoever’s handling their data, which is where analytics engineers play a crucial role. They are essential in bridging the gap between cutting-edge analytical models and secure, responsible data implementation.
Actuarial Risk Management
Analytics has made its mark in most facets of financial services, but one area in particular – Actuarial Risk Management – has gotten a big boost in the last few years. We’re seeing this reflected in the talent pipeline.
The rising popularity of hybrid degrees (Data Analytics with Actuarial Science) and the emergence of interdisciplinary teams represents a fundamental shift in priorities when it comes to workforce development.
In terms of product development, insurers and financial institutions are now commonly leaning on machine learning and AI-driven insights to refine pricing strategies, stress-test scenarios, and improve capital efficiency.
Interestingly, actuaries are utilising analytics to move beyond traditional risk models and play a lead role in the development of embedded insurance products. This enables them to integrate coverage into financial products at the point of sale, contributing to a surge in microinsurance.
o Challenge: A lack of access to niche, hybrid skillsets that can keep up with the rate of technological implementation is still a stumbling block for many firms, especially given the rate of growth in the sector. According to the BLS, employment of actuarial talent is expected to grow 22% in the next ten years, ‘much faster than average for all occupations.’
Lending
Machine learning credit risk models are another standout trend in financial services, an area that gained signification traction back in 2023. Advanced analytics has given rise to tailored credit scoring, thanks in part to its ability to draw data from alternative sources (transaction patterns, spending history, etc.).
By bypassing the often-exclusionary limitations of traditional credit scoring models, data analytics could lead to greater financial inclusion in historically underbanked areas. For example, those with little to no credit history could be qualified on a different set of hyper-personalised metrics like social media usage, telecom records, or even previous psychometric tests.
o Challenge: Data bias. Lending has a tumultuous tabloid history with data bias, with firms facing a fair amount of scrutiny over their decision-making, even in the last few years. While stronger data analytics present a chance to improve this area tenfold, they also risk reinforcing these existing biases if models are trained on flawed data.
Let’s Talk Data!
Between our tech consultants here at Trust in SODA, the AI specialists at DeepRec.ai, and our financial services experts over at Broadgate, we’re sufficiently overexcited for the future of data analytics in financial services.
We’re eager to talk to anyone working at the intersection of tech, governance, and financial services, so please reach out if you’d like to start a conversation about the future of the world’s most exciting industry: francis.alexander@trustinsoda.com.