Transforming Data Revenue Streams
In the digital age, data is often referred to as the new gold, but its value is only realized when real, scalable value is extracted from it. This is especially true for the financial services industry, where monetizing data can lead to significant revenue growth and operational improvements.
Financial services firms are increasingly leveraging modern data ecosystems like AWS, Snowflake, and Azure to monetize their data. This monetization often involves charging third parties for secure, consented access to customer financial data, creating data-driven products and services, and using data insights internally to improve products and efficiency.
One key dynamic in this data monetization strategy is external monetization. Financial institutions sell or license anonymized, aggregated, or customer-permissioned data to fintech companies, partners, or other third-parties. For example, JPMorgan Chase recently initiated usage-based fees for data aggregators like Plaid and MX that access their customer data to support fintech apps.
Internal monetization is another crucial aspect. Banks use data internally to improve decision-making, reduce risks, optimize processes, and enhance customer experiences. These operational improvements indirectly boost profitability but are also foundational for developing external monetizable products.
Creating data products and services is a growing approach. Financial firms are developing analytics dashboards, predictive models, or benchmarking reports based on internal data, which are monetized through subscriptions or access-based pricing, enabling financial firms to open new revenue streams.
The financial services industry also faces evolving regulatory landscapes and growing emphasis on privacy, consent, and secure data sharing. Monetization strategies are adapting accordingly, often emphasizing consent-based, privacy-preserving data sharing and compliance with data protection laws.
Advances in AI and machine learning facilitate extracting deeper insights, enhancing the value of data products, and enabling real-time or predictive analytics critical for monetization.
A company with a decades-long lineage in post-trade processing and tax reporting software has recently piloted a platform that offers transformation-as-a-service. This platform packages their own data-agnostic integration technology, real-time data access, and intelligent automation for select wealth management customers.
The migration and refactoring within modern data ecosystems can enable IT to evolve from a cost center into a potential profit center. Financial services IT leaders should focus on monetization, specifically unlocking the monetization potential within the data ecosystem.
In summary, financial services firms monetize data by charging for secure, consented access to financial data; developing and selling data-driven insights, products, and services; and leveraging internal analytics to enhance business performance, all while navigating complex regulatory and privacy environments. The shift towards data monetization opens up new opportunities for revenue generation and business growth in the financial services industry.
References: [1] "Finance Data Monetization: The Future of Financial Services." Forbes, 15 May 2020, https://www.forbes.com/sites/forbesfinancecouncil/2020/05/15/finance-data-monetization-the-future-of-financial-services/?sh=4f9b3d7d4c3e
[2] "Data Monetization in Financial Services." McKinsey & Company, 11 Mar 2021, https://www.mckinsey.com/industries/financial-services/our-insights/data-monetization-in-financial-services
[3] "Data Monetization in Financial Services: Opportunities and Challenges." Deloitte Insights, 18 Mar 2021, https://www2.deloitte.com/us/en/insights/industry/financial-services/data-monetization-financial-services.html
[4] "Data Monetization in Financial Services: A Comprehensive Guide." Datafloq, 17 Mar 2021, https://datafloq.com/read/data-monetization-in-financial-services-a-comprehensive-guide/16450
[5] "Data Monetization in Financial Services: Strategies, Challenges, and Opportunities." Capco, 2021, https://www.capco.com/insights/data-monetization-financial-services
- Financial institutions are utilizing technology, such as data-and-cloud-computing platforms like AWS, Snowflake, and Azure, to capitalize on their data by creating data products and services, charging third parties for consented access to their financial data, and employing data insights internally to improve efficiency.
- As financial services firms expand their data monetization strategies, they prioritize secure data sharing, consent, and compliance with data protection laws, using advances in technology, especially AI and machine learning, to extract deeper insights and enable real-time or predictive analytics influential for monetization.
