In recent years, data analytics has become vital for the finance industry. The continuously improving ability to collect, process, and analyze vast data has given financial institutions valuable insights. It has afforded them the ability to make better-informed decisions.
As the finance industry grows and changes, companies face increasing pressure to stay competitive and navigate a new and challenging world.
How Do Financial Institutions Use Data Analytics?
Worldwide, many businesses use data analytics to improve internal operations. They also rely on data analytics to help them understand their customers more deeply.
Data analytics is a practice that helps people understand raw data. The goal is to improve the company by analyzing past performance and predicting future trends. Thor Olavsrud, CIO, says, “The chief aim of data analytics is to apply statistical analysis and technologies on data to find trends and solve problems.”
While data analysis is valuable across all industries, it is especially true of financial institutions, which have too much raw data to analyze manually. Financial data, such as buying habits and credit card reports, can be invaluable to these companies.
Why is Data Analytics Important in Finance?
Data analysis is integral to the finance industry’s success. It would be impractical for any financial organization to work without data analysis.
The coronavirus pandemic caused damage and uncertainty within the finance sector. The world is still recovering from it. However, without data analysis, it would take decades rather than months or years.
Bassem Hamdy, author of The Importance of Data Analytics in Finance, said, “When a company can masterfully forecast cash flow and execute on its strategic financial visions, it is empowered to serve its market and clients for decades to come.”
Hamdy believes that implementing a financial strategy starts with understanding a company’s current financial position. Financial professionals must be able to answer questions using financial and operational data, as gut instinct will only take you so far. This is where a financial data analytics professional comes in.
How Data Analytics Is Revolutionizing the Finance Industry
Data analytics has revolutionized the finance industry by reducing human error in daily financial transactions.
What’s been transformed:
- Finance executives can use insights from structured and unstructured data to promote better goal-setting and forecasting.
- Finance teams can gather the necessary information to accurately see key performance indicators (KPIs), such as revenue, net income, payroll, etc.
- Finance teams can evaluate important metrics and detect fraud in revenue turnover. Financial services had a massive increase in digital fraud activity in 2020.
What is the Function of a Finance Data Analyst?
Finance data analysts help financial institutions utilize data to make well-informed business decisions. They examine financial records to prepare in-depth reports.
They are knowledgeable of and proficient in data mining, financial analytics, understanding business models, predictive analytics, data science, big data analytics, risk management, algorithms, and algorithmic trading, financial forecasting, finance models, advanced analytics, data management, Python, automation, BI, machine learning, AI, and more.
Financial analysts often work with chief financial officers (CFOs) to ensure the company benefits from the data they analyze.
Finance data analysts often start as junior analysts. By earning best data analytics certifications, these professionals can prepare for a career in financial analysis.
How Will Data Analytics Affect the Future of the Finance Industry
Data analysis is vital to the success of financial institutions. As the financial sector continues to digitize and grow, there will be more and more data to interpret. Just 0.5% of businesses use their data efficiently.
In a very short period, big data has taken over the financial industry and many other businesses. Fintech companies know that it is imperative to use generated data to ensure a viable business future. Fintech gives a vast amount of value by providing solutions to issues in advance, building an effective business plan, and helping to develop a better customer-centric approach.