WHAT DOES A FINANCIAL DATA SCIENTIST DO?
Consumer’s behavior and preferences become clearer through sentiment analysis, especially from social media and marketing databases. The goal is to find patterns in the data with predictive potential. Predicting trends before your competitors is a powerful driver of top-line growth and a competitive advantage for many companies. 62% of companies believe that Big Data has significant potential to create competitive advantage.
Retailers can follow internet gaming channels to make sure they’re keeping the hottest video games in stock. And e-commerce sites can offer the perfect promotion for a potential customer based on their preferences revealed through social media engagements.
Following the subprime financial crisis, banks are increasingly wary of credit risks. Through real time analytics, early warning signals for clients can emerge such as a pending divorce, expensive purchases or a gambling problem. Subsequently, actions can be taken proactively by the bank (like freezing lines of credit) without waiting until the next loan-servicing evaluation. If excessive warnings are being picked up en masse, banks can tighten credit standards overall to compensate.
Market and portfolio risks are being addressed through quantitative analysis. Investment managers are using proprietary algorithms to scour mountains of market data, looking for clues to a change in market sentiment and direction. They target everything from news headlines coming across Reuters to internal trade monitoring to detect overly concentrated positions.
Regulatory scrutiny on banks is as acute as ever. Banks must be in full compliance or the fines can be punitive-sometimes in the billions of dollars. Real time analytics might uncover a rogue trader who has amassed a potentially destabilizing speculative position. Smarter data analytics can also help detect and deter fraud. As machine learning continues to accelerate, suspicious activity is being detected in ways previously impossible. Three-quarters of companies report experiencing some type of fraud over the last year, a jump of 14% in just three years. More concerning, 81% of these frauds were perpetrated by insiders. For example, analyzing transaction patterns of a small overseas subsidiary could save the parent company billions in fines by uncovering a money laundering scheme.
If you are interested in pursuing a career as a financial data scientist, take the first step by learning more about degrees in the data science field. Or find out more about career options in Finance.