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Why Smart Data is Key to Unlocking Financial Truth

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Andrew Bonsall is COO at AperiData.

We’ve all heard the adage ‘data is the new oil’; just as oil sparked a new era for industry and how society fundamentally operated, data is the new critical commodity. Like its counterpart, data needs to be found, refined and made accessible before its power is unleashed.

While it has proven to have a wide-ranging and powerful impact on the way the world now operates, including how we manage our finances, customers want greater choice and better services. That’s because legacy processes and systems are limited in their capabilities and often overlook key information.

Financial institutions, lenders and advisory services can step up and answer these needs by harnessing Open Banking, which is changing the way financial data is shared and accessed. At the heart of this is Smart Data, which empowers businesses and individuals to make better informed decisions, optimise their resources, and, ultimately, take charge of their financial futures.

Open Banking is Redefining Financial Services

Under the Open Banking model, financial information is shared electronically and securely, allowing third-party providers to access a bank’s data with the customer’s consent. This enables them to offer hyper-personalised financial services and the impact of Open Banking has already been profound for customers; three quarters (77%) find it easier to keep track of their spending, and 76% said they benefited from better saving opportunities.

If businesses can tap into the potential this offers, the opportunities are huge. They can leverage data in ways that drive innovation, optimise operations, and enhance customer experiences, and this is where Smart Data comes into play.

Smart Data Drives Better Decisions

Large volumes of raw data can be refined into more robust and actionable insights, a process that is referred to as Smart Data. For those offering financial services, this means using data to make more informed decisions, for example approving loans that might otherwise be turned down. Traditional credit scoring often fails to capture the full picture of an individual’s finances, which can lead to rejections due to incomplete or obsolete information.

By harnessing alternative data sources, lenders can gain a more holistic view of a person’s financial behaviour, considering factors like spending habits, income patterns, or individual transactions. This increases the chances of loan approval and allows lenders to assess risk more accurately, leading to better outcomes for both parties.

Importantly, this approach facilitates a more inclusive financial system, where access to credit is determined by a fuller understanding of a person’s financial health.

Levelling Up Optimisation with AI and ML

Artificial Intelligence (AI) algorithms fed by machine learning (ML) models can determine creditworthiness by analysing vast amounts of financial data at speeds and accuracies far beyond human capability. It can identify patterns, predict future behaviours, and recommend personalised solutions. When paired with Smart Data, this can reduce the noise often associated with large datasets, enabling businesses to focus on the most relevant and actionable insights.

All financial products are highly regulated, so there is an evolving set of rules and controls to ensure the responsible use of AI. As regulations are refined, the applications of the technology will advance. This field is relatively new, so we will see the interplay between changing technology and the regulation required to keep consumers safe.

From Insights to Impact

Open Banking and Smart Data are together ushering in a new era in financial services that prioritises customer needs with a system that is more inclusive, efficient, and responsive. As such, the power of data is undeniable. It has the potential to free businesses from the limitations of outdated systems, make better decisions, and shape our financial futures with confidence and clarity. Financial truth, once obscured by complexity and inaccessibility, is now within reach, thanks to the power of Smart Data.

To learn more, visit: https://www.aperidata.com/

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