Can Big Data change the way we pay?

It’s no secret that cash will be a thing of the past in 2022. After recent research by Link revealed that cash payments across the UK will account for just 10% of all transactions over the next decade, we could be on the path to a digital future. .

(Image source: World Economic Forum)

With 70% of UK-based respondents now choosing to pay with a card rather than cash, the evolution of online banking has continued to transform the way we transfer money in 2022. From a spike in fintech adoption to a growing interest in cryptocurrency, money management has become a data-driven business.

As we leap into a cashless future, could big data play a key role in digitalizing banking? Read on as we delve into the future of predictive payments, digital data security, and the impact of AI on the financial industry.

Are we heading towards a cashless future?

59% of the world’s population believe that cash will disappear by 2030 according to a study by Thoughtworks. After Fintech proved to be the most successful evolving industry in 2021, it’s no surprise that the digitally active public is opting for new technology-based transaction aids such as Paypal and Monzo.

In fact, following COVID-19’s push for an e-commerce boom, online payments have skyrocketed as more consumers than ever before engage in cross-border transactions and take steps to simplify the way they exchanged money.

“Cashless transactions are skyrocketing and the UK has by far the highest number of payments made by card, phone or electronically in Europe, with an annual turnover of around £106 trillion. euros per year,” said Phil Hingley, CFO of Thoughwork. “Some sectors of retail – like transport – are already almost entirely cashless and I see other sectors catching up quickly. The question is, when will cash disappear from our pockets?”

As card payment statistics continue to grow, so does the use of other forms of digital transactions. Cryptocurrency adoption, for example, took off in a post-COVID digital arena after 97% of digital currency users confessed their confidence in the cashless form of currency.

The question is, how is Big Data driving this incremental change? As the mastermind behind the success of fintech, AI and big data-based systems are constantly influencing the movement of smart money and breaking down barriers for instant payment applications.

“With coins gone and paper money running out of steam, consumers will make instant payments from their mobile and handheld devices,” Hingley predicts. “Big data will drive our buying decisions, restocking our shelves and giving answers to the financial questions we’ve had over the past decade.”

How will banks use big data in a cashless society?

First, let’s take a closer look at what the term big data might actually mean for the banking industry.

Defined by Investopedia, “Big data refers to large and diverse sets of information that are growing at an increasingly rapid rate. It encompasses the volume of information, the rate or rate at which it is created and collected, and the variety or scope of data points covered (known as the “three Vs” of Big Data).

Currently, the big data and analytics market is worth more than $274 billion globally. As one of the fastest growing industries alongside financial technology and artificial intelligence, big data has had a significant impact on a number of industries, from enterprise security to legal decision-making to smart finance.

(Image source: Research Gate)

Banking institutions, in particular, have more than an exabyte of data stored in 2022, which is collected from call logs, web interactions, consumer histories, and institution visits.

As society slides into a cashless future, traditional banking methods simply aren’t enough in 2022. With the growing popularity of open banking among consumers, new digital first institutions are using big data to keep a leg up. ahead of high levels of online transactions, cross-border payments and a push for fintech-infused money movement.

Here are some of the major current uses of big data in banking and the benefits a data-driven change could have for the financial industry:

  • Data comparison: Investment in big data analytics has provided banking institutions with unrestricted access to consumer spending, income and transaction history. With a wider range of smart analytics at their fingertips, banks can digitally predict future transactions and use consumer data to influence credit extensions, loans and mortgages.
  • Fraud prevention: Big data science is constantly being used to assess risk in the baking industry. By infusing blockchain-based cybersecurity, big data analytics can help banks when processing information that requires auditing, reporting, and compliance verification. This reduces the risk of consumer fraud and information-based breaches.
  • Consumer customization: Investing in Big Data improves customer segmentation. Through analytics, banks can categorize consumers into multiple sectors, based on data-driven metrics. With more information at their fingertips, banks can therefore diversify their customer service and returns, based on predictive data models.

Are there cash flow challenges ahead?

While the impact of big data on the financial sector continues to remain positive for the majority, a cashless future could still pose challenges for a select few.

After a recent study found that 8 million consumers in the UK still rely on cash payments or struggle to make a digital payment, a cashless future could pose a problem for older generations, small businesses and disconnected consumers.

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