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Predictions for Alternative Data in 2022



Predictions For Alternative Data In 2022

Neil Chapman, CEO of Exabel


2021 saw various firsts for alternative data. The $1.6bn flotation of SimilarWeb evidenced the emergence of the first ‘unicorn’ alternative data provider, with Yipit Data’s capital raise subsequently resulting in a second unicorn valuation. On the regulatory side, the Securities and Exchange Commission issued its first fine against an alternative data provider, charging App Annie with securities fraud. Meanwhile alternative data adoption continued apace following its breakout year of 2020, in which investors had found alt data’s often higher frequency to be particularly valuable amidst such unprecedented uncertainty. This year the London Stock Exchange Group published research showing that in 2021, of all the financial services firms that it contacted, only 1% are not using alternative data at all; in 2018 that number was still up at 30%.

Looking ahead into 2022, it is now possible to make some predictions around what awaits the ever-growing community of alternative data stakeholders. 2022 will be the year when barriers to usage of alternative data will truly begin to come down:


Tooling solutions have their moment

Alternative data’s history is rooted in a form of elitism. For much of its early development, only the most sophisticated hedge funds had access to the cutting edge technology and brainpower required to successfully extract value from alternative data. As the sector matures this truth is changing; as the knowledge spreads out of the hedge funds so too do the technical capabilities, increasingly in the shape of external software platforms that allow practitioners to extract value from alternative data. Such platforms can bring an alt data capability to new users of all shapes and sizes, from non-data savvy investment teams at larger long-only investment funds to smaller family offices that have previously had the knowledge and the appetite to make the most of alt data, but had lacked the technological opportunity. This externalization trend could ultimately touch the sophisticated funds that first conceived the use of alternative data, since growing efficiencies could make these external platforms more competitive than that which is possible within a single fund.


The SEC swings into action

As mentioned, the SEC issued its first fine to an alternative data provider in 2021, finding App Annie guilty of securities fraud. This was not the precedent-setting example that the market has long been anticipating however. For several years, legal advisers have been warning hedge funds and alternative data providers that the SEC might wade into the sector and punish a practitioner that was using alternative data in an as-yet unspecified manner deemed by the regulator to be ‘too loose’. In the case of App Annie, the regulator found the app data provider to be guilty of behaviour that would be reprehensible in any sector, not related to alternative data specifically. What the App Annie judgement demonstrates is the fact that alternative data is now firmly embedded on the SEC’s radar, so there may well be further regulatory activity in 2022.


Buyside personnel moving into product

2021 has seen a growing trend for buyside personnel taking their hard-earned skills onto the product side. This could be a sign that strong venture capital flows have finally convinced these asset managers that the time is ripe for a more entrepreneurial project with high growth potential, or it could be a signal that the market is moving towards the externalization trend mentioned above, or both. Either way, it is a trend that looks likely to continue in 2022.


The rise of Synthetic Data

Synthetic data, or data that has been manufactured or created artificially for a specific purpose, is coming increasingly into vogue in data science circles, and alternative data is no different. Hedge funds have long used data pertaining to private individuals, in almost all cases for uses in which personal identifiers are irrelevant to the value. With public and regulatory scrutiny increasing around privacy, the benefits of synthetic data in which personal identifiers are scrambled and obfuscated are becoming increasingly obvious. Other uses of synthetic data, such as for generating a larger dataset for model training, or using tweaked datasets for scenario-planning, might also have potential futures in the alternative data world as the techniques are being perfected more widely.


The march of the retail investor

The Gamestop affair back in January 2021 announced the return to the limelight of an established but sometimes forgotten player – the retail investor. The year turned out to be an influential one for the man on the street, who drove valuations both up and down, meaning an investor not paying attention to the chatter could easily find themselves burned. In 2022 this trend is likely to continue and alternative data offers opportunities both to institutional investors seeking to track what retail investors are investing in in real time, and increasingly opportunities for retail investors themselves to make more informed decisions with platforms tailored for their use.


Expansion into Europe

Alternative data originated in the United States, which is still the sector’s hinterland. In recent years inroads have been made in Asia, but the next push looks likely to be taking place in Europe. Increasing local availability of credit card and other data types, taken along with the developed nature of European markets, has made Europe a geography ripe for alternative data to increase its influence. Language and privacy regulation hurdles still exist though, and the market will need to continue to find solutions that negate these hindrances.


New forms of NLP

Natural language processing has been in use since the earliest forms of alternative data were emerging in this millennium’s first decade. Textual analysis has spread from creating sentiment gauges to track social media such as Twitter, and into the cat-and-mouse contest between hedge funds trying to extract extra meaning from earnings calls and investor relations executives attempting to keep corporate communication as neutral as possible. In 2022 a new battleground is being mapped around audio analysis, with alternative data emerging around the tone and cadence of corporate communicators, with the aim being to mine this data and reveal more than the speaker is intending.



The formula for success: delivering total experience in financial services





Monica Hovsepian, Global Industry Strategist, OpenText


The tumult of the last few years has thrown many challenges at financial services. Geopolitical and social evolutions have met head on with technological upheaval to threaten the previously settled order of the sector.


Luckily, that very same technological upheaval has allowed financial services institutions (FSIs) to innovate. Faced with new competition from fintechs, challenger banks, and big tech, FSIs have transformed the way they deliver products and services to customers over the last decade or so. It would be unthinkable now, for example, for a customer to have to visit a branch with their banking book to pay in or take out money from their accounts.


So much has changed. But change, it seems, is never finished. As younger generations become consumers and employees in their own right, they are bringing their own ideas about how they would like to live, work and engage, and FSIs need to keep evolving to cater for them.


Of course, this has always been the way of things: to some extent, adapting to the changing demands of customers is old hat for FSIs. It’s just that now, the tactics used to do so have evolved. Rather than focusing solely on Customer Experience (CX), FSIs must move to a focus on delivering Total Experience (TX) if they are to rise above the heated competition that continues to drive innovation across the sector. And, by delivering the Total Experience, FSIs also appreciate the benefits of Operational Experience (OX) and efficiencies.


CX + EX + OX= TX: the full formula for FSI success in the digital age


In its simplest terms, TX is the optimisation of both CX and employee experience (EX). To add a bit more colour, it is a recognition of and approach to the idea that only through elevated employee experiences and improved operational efficiency can the best possible customer experience be delivered. Investing more holistically across what matters to the customer delivers stronger returns than focusing on isolated areas.


Or, since this is a formula-driven industry for numbers and formulas, let’s express this idea another way: CX + EX = TX (ROI).


It’s well reported that delivering excellent digital customer experiences is increasingly defining for today’s FSIs. The Financial Brand, for example, reports that banks with customer-centric cultures are 60% more profitable than others. Yet other reports suggest that many customers are dissatisfied with the experience that banks are offering.


So, why is that?


Well, in order to provide the seamless, personalised digital experiences demanded by today’s customer, banks need a 360-degree view of customers, across the entire enterprise, at each stage of their journey. Technology is already in place to enable this, but the discipline of customer lifecycle management is still under-developed in FSIs, resulting in fragmentation of backend systems and disconnects between different employees and business units.


This disconnect then translates into the experiences that FSIs deliver to their consumers, as it leads to frustration for employees as they struggle to locate and manage customer data between siloed systems quickly and easily. It stands to reason that putting CX and EX together is the way forward for banks looking to find the formula for success in the digital age and deliver operational efficiency.


Lifting all boats – how to achieve total experience in FS


As John F. Kennedy once said, ‘the rising tide lifts all boats’. FSIs can adhere to this idea by investing in technology that elevates the experiences of both customers and employees, creating a virtuous cycle of optimisation that will form the foundations for long-term success.


Data can be a friend to FSIs here, rather than a foe. With the sheer amount of it available to businesses in the sector, it can seem daunting to even approach the task of wrangling data into insights and then actioning those insights.


It needn’t be: leveraging the latest innovations in technology can help to integrate key CRM systems to ingest, analyse, manage and distribute the content needed to support all customer-related business processes. Doing so will offer employees a single source of truth to support any customer process or enquiry, thereby improving EX at the same time as optimising the data available to improve CX.


In a world of unpredictable demand and shifting priorities, FSIs that invest in these integrated solutions stand to benefit from real-time, 360-degree view customer information, used to empower employees to provide superior service, deliver optimized customer experiences, enforce governance and risk management and reduce operational costs.


Gartner estimates that, by 2024, organisations providing a total experience will outperform competitors by 25% in satisfaction metrics for both CX and EX. In a game of fine margins like financial services, that’s a level of competitive advantage that you don’t see on offer every day.


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Billner Group offers comprehensive educational resources and expert guidance to fill you with trading knowledge in all the possible ways. You can get help from their experts at every step of your currency pair trading. All these will enable you to start intelligent trading, even if you have had no prior experience. As a result, you can achieve new heights of success on this platform.

Cutting-Edge Technology at Billner Group to Minimize Risks

To make your currency pair trading profitable, Billner Group offers a range of advanced technical analysis tools. The use of these tools, like price charts, indicators, calendars, and more, helps currency pair traders to make informed decisions. You can observe the fluctuations in the currency pair movements with more precision. Their historical price charts and real-time market data will also enable you to identify the potential entry and exit trading points. Using these tools also facilitates the traders to identify the trends and patterns. As a result, they can build their trading strategies and make profits.

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The Bottom Line

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