How is DATA ANALYTICS applied in FINANCE ?

When data analytics is applied to finance, the combination helps build systems and processes to extract insights from financial data in various forms. 

Data analytics can give financial managers, accounting staff and even purchasing managers reliable information needed to make critical decisions. 

But what is financial data analytics? What do you need to know for financial data analytics? What are its benefits? Keep reading to learn these and much more.


Customer Analytics

Many financial institutions have made customer experience and personalization a top priority. With the help of data analytics, they can gain insight from customer behavior to make better strategic business decisions or offer consumers recommendations based on their banking or investing preferences. For example, insurers are using supervised machine learning to understand drivers of consumer behavior, reduce losses by eliminating below-zero-value customers, increase cross-sale opportunities, and measure customers’ total lifetime value. 

To understand customers, banks and financial firms also turn to unsupervised machine learning, where groups of similarly-behaving customer groups can be identified using clustering techniques.


Customer Segregation

Data analytics in finance can help financial companies to segregate customers according to their age, gender, behaviour, and interest. This can not only help them in analyzing the spending pattern of an individual customer but also in offering better services to them. 

Data analytics in finance is bringing about a storm of new opportunities and transformation that empower companies to identify valuable customers and provide the best financial offers to them to make them feel more valuable. Consequently, this can lead to increased customer satisfaction and will also help companies understand the channel usage, spending patterns of the customers, and consequently cross-selling of various products.


Easily identify and manage costs and revenues

Data analytics works with ERP data and the information from income statements, balance sheet, and cash flow. 


Credit Allocation

Every person who accesses or registers on a website leaves a trail of information called a digital footprint, an extremely large dataset that is packed with useful information. Machine learning algorithms, supported by data analytics and high computational power, can parse digital footprints to unveil previously-unknown relationships between new factors and customer behavior. These insights can affect credit allocation and outperform traditional credit scoring models at predicting how likely a customer is to pay back a loan. 


Offering Personalized Services or Products

Personalized products and services have become the first preference of customers across industries. Through personalized services, companies can offer product and services to customers according to their interest and demand. Companies in the financial services sector can also benefit from this by leveraging financial analytics solutions. Data analytics in finance can help companies to analyze the interest, buying habit, and requirements of individual customers through sentiment analysis. Therefore, this can help them retain the present customer and attract the new one.


Data analytics for Financial Statements

Data analytics involves evaluating a company’s historical data to better understand the current and future financial health of a company. By tracking your financial performance alongside sales and purchasing data, you have access to your complete financial truth. Evaluating historical data alongside forward-looking financial statements can assemble a forecast that considers potential variations over time. For many companies, having data stored in disparate sources poses a challenge. A data analytics solution overcomes this problem by combining the data from your existing financial solutions into one single source for analysis. Your data is then quickly and accurately presented for further interrogation.


Enable data-driven risk assessment

The financial industry faces potential risks from competitors, credits, volatile markets and more. Data analytics can help finance firms analyse their data to proactively identify such risks, monitor them, then prioritise and address them if investments become vulnerable.

Financial traders, managers, and investors can make reliable predictions around trading, based on past and present data. Data analytics can analyse the market landscape and customer data in real time, enabling financial specialists to take action to mitigate risks.

Data analytics can also be used in finance to implement a credit scoring algorithm. Using the wealth of available customer data, it can analyse transactions and verify creditworthiness far more efficiently.


Fraud Prevention

Traditional fraud detection uses rule-based models that identify unusual transactions. These models often flag legal transactions based on broken rules or  fraudulent activities when millions of transactions are happening at the same time. By contrast, machine learning creates algorithms that process large datasets with many variables to find hidden correlations between user behavior and the likelihood of fraudulent actions. Using machine learning techniques and data analytics, banks and other financial services firms create highly efficient systems to detect and prevent fraudulent activities including speculatory trading, rouge trading, and regulatory violations.


Real-Time Analytics

In the earlier period, data were processed and analyzed in batches which means one by one and not real-time. It had a huge disadvantage of data being old by the time it was processed and analyzed. The decisions taken on historical data will not be very helpful or accurate.

Many various industries started having a problem because they require real-time data to gain insights about present circumstances. However, now it is possible to access the data with minimum delay due to the development of dynamic data pipelines and advancements in technology.

Data analytics has now become a very crucial part of Finance and Financial Institutions to keep track of all financial attributes, credit scores and transactions without any issue of latency.


Risk Management

Risk management is a crucial factor in every industry, risk in the financial services sector can come in any form like a failed investment, an unrecoverable loan, and fraudulent activities. Data analytics helps firms find better ways to measure and manage risk across the organization enabling incorporation of new unstructured data sources into real-time risk detection systems. Credit and market risk exposures and valuations can be simulated more accurately, helping banks and financial firms to proactively monitor risks across the organization. Furthermore, this can help in demonstrating increased levels of transparency of underlying assets and risk exposure.


By leveraging data analytics in finance companies get to manage risks more effectively, which, in turn, helps them maximize ROI and reduce regulatory compliance costs.

All the major financial institutions are hiring financial data analysts in 2021. 

If you are interested in a financial data analyst role, set yourself apart by enrolling in VCA Data Analytics Bootcamp. 

We offer customized modules for finance professionals.




To know more about our work and activities, make sure to follow VCA in our social media channels! 

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