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CUT THROUGH VOLATILITY AND MAKE BETTER INVESTMENT DECISIONS WITH ALTERNATIVE DATA

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Tomas Montvilas, CCO at Oxylabs

 

Increased speculation, surging trade volume and a rapidly changing economic landscape are causing an unprecedented level of volatility in the markets. Investment professionals are increasingly looking to alternative data for clarity and to make better-informed investment decisions.

Despite record unemployment and a rapidly declining economy, the stock market is experiencing record highs across almost every sector. This perceived decoupling of the investment markets from the greater economy is concerning investment professionals looking to safeguard their funds from inflationary pressures and other serious issues that threaten to devalue portfolios of all sizes.

No one seems to be immune to the current events – and indeed, short-term market fluctuations are leaving investors of all types concerned about the future.

 

Alternative data provides clarity

Alternative data refers to data from non-traditional sources such as social media networks, forums, or credit card information. Besides providing timely and unique insights, alternative data can provide drilled-down, specialised information that can’t be obtained from traditional sources.

 

Alternative data is critical to decision making 

Technological advances have resulted in massive changes to the investment industry, ranging from how operations are conducted to the number and variety of investment instruments.

Investors of the past often based their decisions on the potential of an entity or commodity, such as a national expansion of a restaurant or clothing store or an investment in a growing public utility. More often than not, these decisions depended on sound economic and financial analysis along with geopolitical insights.

Today, the market has been turned upside down by algorithmic trading, derivatives speculation and over-valuations never seen before in human history. Add in trillions of dollars of government spending, currency devaluation and Covid-era economic restructuring, and we have a recipe for unprecedented volatility that threatens the livelihoods of investors on a global scale.

Alternative data has become an irreplaceable part of decision making. There are numerous benefits associated with alternative data:

  • Faster signal transmission. Traditional data sources like company filings, earnings calls, and other statistics provide data periodically and often with months of delay.
  • Increased granularity of data. Access to highly specific data points can reveal potential niche investments.

 

Alternative data can protect investments and identify new opportunities

While most day traders and speculators rely on short-term data and rumours, long-term traders look to alternative data for insights that help them make sound investment decisions.

Alternative data sheds light on real market events. It cuts through the irrational noise being made in the markets and gives investors insights into actual economic events that help them identify viable opportunities in emerging markets and sectors.

Recent events in the stock price fluctuations of GameStop can serve as a great example. As investor frenzy pushed GameStop prices to new heights, investment giants realised that keeping track of ticker sentiments on the internet can be a powerful tool for creating Alpha. There are now publicly available sources that track the ticker mentions in the subreddit /r/WallStreetBets (registration required).

 

Choosing alternative data types 

Investors and financial analysts looking to harness the power of alternative data have an entire world of information waiting to be explored. Consider the possibilities: According to Cisco, 90% of the data we have generated has taken place in the last two years and by 2022 4.8 billion people will use the internet across 29.5 billion networked devices.

Tracked sources are ever-expanding and diversifying to include social media sites, IoT, geolocation, e-commerce activities, data from government agencies, and much more. Some key areas of interest can include:

  • Supply chain data
  • Patent valuations and indicators
  • Environmental, Social and Governance data
  • Country risk scores
  • News and internet sentiment
  • Clinical trial milestones
  • Building permits
  • Government procurement and public contracts

 

Where to get alternative data

Sources of alternative data are numerous and growing, and determining the right choice largely depends on the data’s end purpose. Corporations across all sectors rely on firms that aggregate data from IoT, consumer websites, government sources and more, to enhance marketing strategies for their clients.

These data firms do not confine their scraping efforts to extracting data sets from standard sources. Many extract information from non-traditional sources such as tweets, turning them into alerts that gauge sentiment for use by traders, brands and other organisations that require real-time data. Others scrape application data to provide insights to brands that can aid product strategies and marketing campaigns.

 

How to extract alternative data

For most businesses, there are 3 options: buying alternative data from aggregators, outsourcing the scraping or building an in-house scraper. Buying or outsourcing data acquisition is simple as long as you are willing to pay a premium.

Extracting alternative data is a multi-faceted process that requires a scraping program and proxies. Success often depends on flexibility, so all data points are extracted successfully. Since all data sources are different, a hard-coded and inflexible schema is likely to result in serious issues during the data extraction process.

The use of high-quality, ethically-sourced proxies is essential to distribute requests and avoid server issues. The choice of either datacenter, residential proxies or next-generation solutions that leverage AI and ML technology depends on the type of data being extracted and its source.

Datacenter proxies offer unlimited traffic and are ideal for scraping raw public data with greater speed and stability. Residential proxies are suitable for more complex targets. Complex layouts requiring specialised customisation can be successfully scraped with the use of next-generation solutions powered by AI and ML technology that can extract public data with higher efficiency and greater success levels.

Not all businesses have an in-house scraping department. Financial organisations and investment firms can leverage ready-to-use solutions that provide data ready to be analysed. Besides freeing them from the complexity of data extraction, these tools allow companies to focus resources on analysing the data rather than focusing on the extraction process itself.

 

Wrapping up

The age of big data has arrived, offering solutions to investment professionals looking to cut through the prevailing stock market volatility to reveal clarity for better decision making. Alternative data, along with innovative scraping tools and proxies, can empower investors to make better decisions that can endure short-term instability for better returns over the long term.

 

Business

How FS organisations can utilise data to boost customer experience

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Charles Southwood, Regional VP and GM – Northern Europe and Africa at Denodo

We’ve all heard the age-old adage “the customer is always right”. It insinuates that, in any sector, the needs and desires of those buying a brand’s product or services should be paramount. However, today’s customer has new standards and it is becoming harder than ever for businesses to meet and exceed them.

This is certainly the case in the financial services (FS) sector where getting customer experience right used to be relatively simple. The human touch was traditionally delivered as a bi-product of in-store, transactional interactions. Perhaps, as a result of this, few people ever considered changing their provider and the traditional, established banks ruled the space.

However, with the dawn of online banking and the introduction of new, exciting challenger banks as well as the UK’s unique Current Account Switching Service, the balance of power between the consumer and the bank is changing. Consumers no longer feel locked in. If their needs aren’t being met, they aren’t afraid to look elsewhere and switch their allegiance to other companies. In other words, loyalty is far from guaranteed and customer acquisition is only half the battle.

Retention relies upon delivering strong, unique customer experiences that beat down the competition. In order to achieve this, FS organisations will need to be able to leverage data. Its insights could be the differentiator that enables them to stand out. The positive news is that, in our online world, there is a constant stream of data being produced. However, having access to all this data doesn’t necessarily mean that a brand knows how to effectively analyse and utilise it.

Ensuring data provides insight

The rapid growth in digital technologies and services across the sector has left many FS organisations juggling an unimaginable amount of data. This data is both complex and much of it is lacking in quality. Structured, semi-structured and unstructured, it is stored in many different places – whether that’s in data lakes, on premise or in multi-cloud environments. Before FS organisations can even think about using it to inform customer experience strategies, they need to be able to find it and understand it.

This is where modern technologies – such as data virtualization – can help. Through a single, logical view data virtualization boosts visibility and real-time availability of all data across an organisation.  Unlike traditional extract, transform and load (ETL) solutions, it does not move and copy data. Instead it leaves it in the source systems. In other words, instead of just replicating data, data virtualization reveals an integrated view to those trying to find it.

For FS organisations this provides several important benefits. For example, it helps when data sovereignty issues arise and the movement and replication of data outside certain countries is illegal. Data virtualization solutions can also assist in terms of financial reporting by fetching data in real time from underlying source systems – applying the necessary security and obfuscation whilst delivering the performance, the agility and the accuracy needed through the seamless connection of data.

FS organisations that adopt data virtualization, are likely to see an improvement in the overall performance and efficiencies of their business operations. Overheads will be reduced, as will the length of project times. Above all, data virtualization will rapidly strengthen the customer experience by supporting business leaders to think strategically and make decisions based on real-time insights. But don’t just take my word for it.

The proof is in the pudding: How Landsbankinn is delivering on the CX promise

Landsbankinn is just one of the many financial services institutions that has already successfully embraced data virtualization and its benefits. Despite being the largest financial institution in Iceland – with around 40% of the retail and 33% of the corporate banking market share – Landsbankinn used to face several issues when it came to data sharing and analytics.

Over 45 siloed data sources – including Oracle databases, data warehouses and APIs from internal and external sources – made finding and accessing the right data at the right time extremely difficult. Without real-time data to fuel informed decision making, customer experience and operational efficiency were suffering. As a result, Landsbankinn was in need of a data overhaul to streamline and integrate its infrastructure.

To bring together its complex data landscape and collect data in real-time, Landsbankinn implemented the Denodo Platform – a data integration and data management solution built on data virtualization – to build a logical data warehouse. As a result, the team can now aggregate data from multiple data sources, transform that data based on the applied business rules, and then make it available to consuming applications. Ultimately, this means that, throughout the organisation, the data can be utilised by a wealth of employees, even those who are not particularly IT savvy. It also means that the business leaders can use data insights to make well-versed decisions and provide a plethora of services to Landsbankinn customers both quickly and efficiently.

In recent years, customer retention has become the key to successfully growing a business. This cannot happen without an effective customer experience strategy. The ability to convert data into insight is priceless in an economic landscape where the line between a business thriving, surviving and failing is so thin. Those operating in financial services must harness modern technologies – like data virtualization – to stay at the top of their game and ahead of the competition.

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Banking

The Importance of Digital Trust in Banking and Finance

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By Maeson Maherry, COO at Ascertia

 

With the rising adoption of eSignatures and the acceleration of digital transformation, trust in digital systems is more important than ever before. As a recession looms, the ability to trust digital systems is critical to the stability and security of the banking and finance industry.

So, what should businesses prioritise in an increasingly online world? Information security, data integrity, and digital trust are crucial for ensuring regulatory compliance and customer satisfaction.

Digital trust is empowering banking and finance institutions to effectively tackle issues of identity theft and fraud.

What is digital trust?

On the surface, digital trust refers to a digital system or platform that is secure and can be relied upon to protect and properly handle sensitive information.

Building the confidence that people have in digital systems, platforms, and technologies to handle their sensitive information, protect them from fraud, and function as intended is paramount for decision-makers going forward.

Trust online encompasses various aspects, such as data security, privacy, authenticity and reliability. Digital trust also involves assessing the trustworthiness of digital entities such as websites, apps, and online services, as well as the trust in the integrity and reliability of digital communications and transactions.

Maeson Maherry

Digital trust is a key element of digital transformation, the additional step to ensuring the digital systems in place are secure. This can include the following:

  • Online banking platform for customers
  • Digital document approvals and workflows
  • Secure digital signature solutions
  • Know your customer (KYC) checks
  • Electronic anti-money laundering procedures

Why is digital trust important for banks?

One of the main reasons why digital trust is so important in banking and finance is that it helps to tackle issues of identity theft and fraud. Customers and regulators require reassurance that personal and financial data won’t fall into the wrong hands. This includes customer statements, investment authorisations, legal records and customer personal data.

Online banking is now well established but the technology continues to evolve and so do the potential threats to data security. With phishing and other identity theft a daily concern, establishing digital trust in the industry is key.

Digital trust provides a means to trust in the identity of a person or document online, to the same degree as meeting or signing in person. This requires additional checks and layers of security to verify identities and the security of documents.

The role of eSignatures in banking

Digital trust is vital in the secure implementation of eSignatures.

In the banking and finance industry, eSignatures are becoming increasingly popular as they allow for transactions to be conducted quickly and securely. However, for eSignatures to be effective and to provide digital trust, all parties involved must trust in the transaction. This is done by ensuring eSignatures are valid and that the person signing the document is who they claim to be.

There are global standards to ensure the authenticity of eSignatures for digital signing. This means there is a way to validate the digital trustworthiness of eSignatures if implemented and used in a manner that meets certain criteria for security and authenticity.

For instance, digital signatures that are compliant with internationally recognised standards, such as eIDAS (Electronic Identification and Trust Services) in Europe, can be considered digitally trustworthy. It’s important to understand not all eSignatures provide the same level of security and to ensure the correct eSignature is used for the purpose and security required.

eSignatures that use advanced digital signature technologies such as Public Key Infrastructure (PKI) or biometrics, can be considered more digitally trustworthy as they provide a higher level of security and authentication.

These technologies use cryptographic methods to ensure that the signature is unique to the signer and cannot be replicated or forged. These standards establish a legal framework for the use of electronic signatures and ensure that they are legally binding, enforceable and offer the same level of trust as traditional signatures.

How does digital trust prevent fraud?

If the public loses trust in digital systems, it could lead to a loss of confidence in the financial system. Fraud, in particular, is at the forefront of public concerns.

Digital signatures are well positioned to offset the risk of financial fraud, largely due to three critical factors when assessing the digital trust of an eSignature:

  • Authentication: To verify the identity of the signer, eSignatures employ sophisticated technologies such as PKI. This confirms that the person signing the document is who they say they are and aids in preventing fraud through impersonation.
  • Tamper-evident: Tamper-evident features are often included in high-trust eSignatures, which identify if a document has been changed after it has been signed. This helps to prevent fraud by identifying manipulated papers and giving an audit trail of the signature.
  • Compliance: International standards such as eIDAS ensure that eSignatures are legally binding, enforceable, and provide the same level of trust as traditional signatures.

The banking industry specifically will benefit greatly from investing in digital trust ecosystems that include eSignatures, biometrics and encryption software to provide verification and assurance for customers.

In the future, financial institutions will adopt Know Your Transaction (KYT) as a means of implementing cybersecurity measures at the transaction level in their banking protocols.

By utilizing digital signatures at the transaction level and verifying them upon receipt, the financial industry can achieve KYT, ensuring that the source of information is under the control of the endpoint and that transaction information has not been tampered with.

This level of security will be a crucial aspect of achieving digital trust in the financial industry moving forward.

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