Data analytics

Data analytics will drive financial innovation and business growth in a post-COVID world

The COVID-19 pandemic has vividly illustrated the power of data analytics to extract insights from consumer spending data to reorient business strategies and public policies.

One such example is using data analytics on transactional data to help financial institutions count and counter the COVID-19 impact. A report outlining year-over-year shifts in spending broken down by day relevant subcategories was provided along with a quantitative financial assessment on clients’ businesses. This was followed by drawing up likely scenarios in terms of mitigating actions and growth opportunities.

When an Asian country wanted to understand the impact of the lockdown on its economy it chose to analyze transaction data. Consumer spending growth had crashed from double-digits year-on-year to minus 15 percent within a month of the economy being shuttered. Rather than looking at consumer expenditure as a whole, it broke it down to online and offline spending, discretionary versus non-discretionary and spending by segments like groceries, dining out, travel and entertainment. Changing consumption patterns indicated the sectors that had been most affected.

Assessing how much, how long and where to keep government intervention growing requires a detailed knowledge of which way the wind is blowing, especially when it’s as unpredictable and unprecedented as COVID-19. These cases demonstrate the power of an agile, disciplined approach to data and analytics. By using the right data, tools and expertise, businesses and governments can get insights for effective response strategies.

The insights need not be surprising to be useful. If based on reliable data, decisions can be taken and implemented confidently.

In one of the instances, it was inferred that a fast-food restaurant must shift resources to those outlets that had a better chance of rebounding. It aligned timings and menu options with work-for-home habits based on insights from transaction data which showed that stores with home delivery options were suffering the most while those that were open round-the-clock in areas with few competitors were least affected.

In UK, a newly introduced portal is helping people and businesses manage the transition from the lockdown by providing searchable information about merchant establishments that have re-opened. This is based on successful payments transactions at the relevant stores within the last 48 hours and up to the previous seven days.

The new normal is still unknown but it is clear that digitization will gain pace. The trend of people using less cash is likely to endure. Contactless payments could become more of a necessity than an option. The adoption of digital payment will accelerate further for being a simple, easy-to-use, widely accepted and the safest way to pay.

The top managers of some of India’s top fintech companies say the pandemic has done more to accelerate the pace of digitization than any other recent event.  It has helped them in customer acquisition. With so many players entering the arena, competition has become acute and that is likely to drive growth. While city folk have made a smooth transition to digital payments, the challenge is in rural areas. Financial products like insurance, mutual funds and gold will have to be tailored for smaller household incomes just as consumer staples companies expanded their rural reach with shampoos and sauces packaged in sachets.

With Indian and global heavyweights jostling for market share, the e-commerce ecosystem is buzzing with activity. Big Tech firms have pledged multi-billion-dollar investments in backend infrastructure over the next five to seven years. A business leader said India will become data rich before it becomes financially rich. By this, he meant the data generated through the online activity will throw up useful leads for generating more business.

Once open credit enablement protocols that are currently under development are in place, credit should get democratized as lenders, payment gateways and merchants are brought on a common platform. Contactless invoice discounting can happen, providing liquidity to micro, small and medium enterprises. In the course of time, even street hawkers should be able to borrow in the morning and repay in the evening with the cash flows they generate during the day. The pandemic may have given impetus to that journey.

By Rajesh Chopra, Senior Vice President & Head – Data and Services Centre(s) of Excellence, Mastercard

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