Can Big Data Rescue People with Bad Debt Cycles?

Big data adoption is sweeping across the financial sector, gaining widespread acceptance among lending institutions as well. While some banks might call themselves pioneers of this movement, it is the medium and small scale lenders who are really driving this trend. The lending marketplace is abuzz with how big data is helping to decode more risk-appropriate lending profiles. Data analytics is being used to increase the quality of customer service and arrest cases of fraud.

Big Data Not Always Associated with Bigger Businesses

The adoption of big data doesn’t have a uniform pattern. Some of the bigger, more established financial institutes might be collecting more data from conventional points of customer interaction only. However, lending agencies handling smaller loans are more likely to analyze poor credit histories to ascertain the overall chances of recovery and the ability to repay another loan. Here, the idea is simple—take a calculated, manageable risk by offering smaller loans to credit-worthy consumers.

Big Data Can be Seemingly Insignificant Data

The indicators used to evaluate borrower profiles are breaking new ground with regularity. Even social media channels that carry employment information or email accounts with a regular history of making payments or receiving funds are being analyzed. The emphasis is on looking beyond the typical buying and payment history of a consumer. Instead, the focus is on the present and near-future ability of the borrower to repay a small loan. Having a stable job over the past few months can be a stronger argument against the non-payment of a small loan years ago. Similarly, small businesses paying taxes on time and interacting with customers on Facebook, Twitter, or LinkedIn are more likely to be approved for a loan.

Yes, demographic information and credit history are still important. However, these conventional parameters took a severe beating in the aftermath of the recession. People with otherwise good credit histories too were caught in this mess. Therefore, credit histories that show positive signs of complete recovery are worthy of being given another chance. When analyzed further with big data analytics, many such deserving borrowers can be identified.

Will big data overturn debt cycles that cripple households?

The answer lies in how you perceive the question:

Do you look at it as technology coming to the aid of people who are conventionally not credit-worthy? (unlikely)

Or,

Do you perceive it as traditional evaluation parameters being improved by using contemporary technologies? (practical and feasible)

The ideal way to look at this argument is accepting that big data provides a better way to identify consumers who can make monthly payments despite a somewhat-flawed credit history. Big data is not the magical cure that some families might expect it to be.

Similarly, big data cannot guarantee loan payments. It is essentially a relief to a market that is still recovering. It cannot alleviate poverty or the healthcare crisis. However, big data will ensure that a larger part of the credit-deserving population is well served. Much of the information collected as a part of the big data strategy is already in the public domain. If the reputation of a neighborhood or money earned during seasonal employment is used to determine credit reliability, is someone being harmed?

Why your Big Data Analysis System Should be Insightful

There is a lot of emphasis on data and data analysis these days. However, data analysis alone won't deliver the desired results; companies should be able to turn the insights acquired by analyzing data into valuable actions.

Using data analysis, a real estate agent should be able to identify potential customers who are likely to move homes in the immediate future. Proper analysis of data involves asking the right questions. This will help realtors detect trends and adjust their business processes.

If you are an agent you could perhaps ask:

Why am I making fewer sales? Or how can I know what my customers want? Remember that the goal of data analysis is to change compelling insights into tangible business actions.

Companies should build a data-first strategy that will help them gather valuable data using their new products. Data analysts attempt this type of exploration to discover critical business insights. They will then present these insights to stakeholders, who after interpreting the insights will use them in making tactical decisions. There is one problem, though. Thanks to its broad nature, open-ended explorations may uncover insights that have little value.

On the other hand, closed loop data explorations are more focused. For example, a real estate company might ask: Are there any real estate investors who bought more than 5 properties last month? This information allows the company to flag that investor as a very important customer eligible for special offers. However, even closed-loop data analysis carries the risk of producing insights of little value.

Why it is important to take quick decisions

One of the biggest challenges of doing business is making great decisions. While professionals in the IT sector are quite comfortable delivering reports, real estate brokers are yet to get into that habit. It is even more difficult to take an action based on available information. And if a company fails to take decisions in spite of having lots of insights, its value will begin to erode.

You may have invested in information management tools and generated all kinds of reports and dashboards, but all of these are useless if you cannot convert your observations into actions. In order to benefit from data analysis, companies should be able to quickly and efficiently transform insights into actions.

This wouldn't be possible without investing in streamlined data collection technologies and decision-making strategies.

The need to adopt a "data first"strategy

When you design or launch a new product, data collection and analysis is probably the last thing you do. However, it needs to be the first. To have a 'data first' strategy is to have the right tools in place to gather insights that will greatly improve user experience.

Partnerships

Many organizations do not have the technical expertise required to gather and analyze data. In this case, they should consider bringing in outside expertise through partnerships. And when you have the right partnerships, you will be able to reach customers with deals, offers, content, and ads across different channels.

Why is data so big?

Big data analysis is a powerful tool that will significantly improve user experience and increase profits. But it’s critical that businesses are aware of the process, have the right tools, and realize the need to move quickly and decisively once they have gathered insights. 

Yes! Data is Relevant Across the Mortgage Industry

Some folks might say that the operational basics of every business are essentially the same, but significant differences can exist. For instance, the manufacturing industry depends upon its performance to gauge its index of quality. Here, quality refers to the processes through which components are assembled and overall quality of these components. However, in the mortgage industry, data is evolving as the most important component. Here, products are the decisions based upon this data.

Understand the Issue: Data Perception among Bankers and Investors

It is generally believed that "Big Data" is beyond the reach of small to medium-level businesses. This notion is driven by the fact that corporations like Google and Facebook have pioneered the cause of being data-driven. Such brands look upon data as their most valuable resource. Many mortgage industry professionals look at cloud-based data and analytics with circumspection. They are not sure whether these data-driven technologies are useful for managing their day-to-day challenges. However, if looked closely, it becomes evident that these technologies are capable enough to find out meaningful processes and facilitate growth.

Is data the cure for all mortgage industry ills?

To be brutally honest, the answer is NO! Typical roadblocks towards using data efficiently are yet to be addressed. For instance, loss of data integrity shows no signs of abating. Many data mistakes might originate from the lender. This is where established dynamics of the industry come to the fore—sales being aggressive and often ignorant of quality or safety standards. To realize the true potential of data, the industry has to think beyond loan and risk performance. They will have to work towards ensuring accuracy of data incorporated into their database.

The Evolving Industry Shift towards Data

Since the economic crisis of 2008, the mortgage marketplace has become more introspective. The industry might not be using data robustly but it is exploring the utility of investing in big data. Investors have traditionally relied on performance of loan-term as the primary benchmark. Data analytics can provide insight beyond this aspect. Data can facilitate access to lesser-recognized factors. This can help industry regulators and investors in better evaluation of securitization or compliance. Data provides useful analytics that helps to achieve better accountability and well-informed decision-making.

The visible progression is towards creating a more comprehensive dataset. This will eventually make governance more effective. However, this is a colossal shift for an industry that has been primarily driven by financial assets. The changing perspective towards looking at data as an asset will take time. However, the change is underway and very palpable. There have been some slow-downs in the way.

 

Several regulations have been introduced that push towards adopting a more data-tolerant attitude. However, a lag is indicated since all organizations cannot jump on to the big data platform immediately. The big change lies in organizations becoming more open towards collaborating data. This is the first step towards creating uniform data that can be used seamlessly across the mortgage industry. This will help to create more effective home-finance regulations.

Social Media and its Potential for Testing Creative Campaigns

Despite the massive popularity of social media, truly creative social media campaigns are hard to find. Many brands still nurture the wrong notion that a little semblance of social media in a campaign is more than enough to get consumer attention. Unfortunately, it isn’t quite so. Social media is evolving rapidly, so if you want your campaign to get the attention it deserves, you will need to evolve as well.

Gone are the days when your YouTube followers would watch every video you uploaded and your Twitter followers would click on every link you posted.  Now it is a battle to create engagement.

Consumers are now being bombarded with numerous social media campaigns. Unless you launch a truly creative campaign, you cannot expect the user to engage with your brand. Interestingly, this isn’t all that difficult. The very nature of social media allows advertisers to be creative.

Creating content for social media takes a great deal of time and effort. What’s more, social media doesn’t allow the marketer to launch a campaign and then take a sabbatical. In order to create engagement, the advertiser needs to work on the campaign constantly.

It is the next big thing in advertising

Social media has caught the attention of big names in advertising and marketing. Businesses too have started realizing the potential of social media. Needless to say, many brands now don’t mind spending hundreds of thousands of dollars on social media campaigns. All of these factors have led to the development of some killer campaigns.

Creative convergence and its potential

Nowadays, we access information through many channels, and interestingly this has led to the convergence of different media platforms. It is now possible to access the same content on multiple platforms, albeit in different forms. This allows advertisers to be creative. 

Social media allows you to be crazy

In spite of the popularity of social media, very few advertisers are spending huge amounts of money on their social media campaigns. Most marketers don’t even spend a dime. They somehow create a campaign and then launch it hoping that it would be noticed.

 

For most social media marketers, their only investment is their time. And because of this, marketers are betting on crazy ideas that have the potential to go viral. If it works, everybody behind the campaign attains iconic status. If it doesn’t, well, nobody is going to lose anything. After all, hardly any money had gone into the making of this campaign. This again allows an advertiser to be creative.

You get to try anything and everything

Unlike other advertising channels, social media allows marketers to explore interesting ways to engage customers. Of course, some of these can be crazy, still they are considered acceptable. The goal is to create engagement and this allows marketers to try every trick in the book to create amazingly smart campaigns that have the potential to reach millions of people.

Social media calls for innovation

Social media is an ever-changing dynamic landscape. Existing platforms are constantly being updated and new platforms are being launched almost on a regular basis. Consequently, the user behavior and expectations change constantly. A campaign that does amazingly well on Facebook may not be that popular on Twitter.

 

This dynamic nature of the media itself spurs creative professionals to try out new and interesting ways to engage audience. This also means that advertisers have to constantly test new ideas and campaigns.