The failure of banks to identify and prevent the Great Recession of 2008, has changed the banking and financial industry in a major way. Among the many changes has been an increasing realization that, if it’s used properly, technology and data can help prevent future recessions. Thankfully, the past decade has resulted in relatively significant advances in technology and data availability. Here are three ways in which big data and technology can potentially help stop the next great recession.
Identify Problems Before They Happen
According to Sigmoidal, the most important thing to remember about technology and big data isn’t their ability to collect information, but their ability to interpret and learn from it. For example, many people in the financial industry in 2007, missed the rapid spike in mortgage defaults until it was too late. However, technology has near limitless application and could solve the biggest problems we face today. Furthermore, thanks to a rapid rise in artificial intelligence, computers may be able to find potential problems before humans are even aware of what they need to be able to find.
Risks Are Less Risky
According to MX, using metrics and AI-driven systems, banks and credit institutions are able to get far greater insight into their customers’ financial health than ever before and allow the lenders, as well as the consumers, to avoid major risks and grow their financial health. This can’t eliminate risk, but it can help to mitigate the worst potential problems before they start. It can also stop banks and financial institutions from making bad decisions that can potentially risk billions of dollars in investments, working to ensure that these decisions are much smarter than ever before.
Data Can Inform Public Policy Decisions
It’s important to remember that government regulators often have access to the same data that the financial institutions use. As a result, financial institutions and government regulators can work together to use this data to identify risks and make determinations about rules and loans going forward. These policy decisions, conducted system-wide, can help prevent future financial breakdowns. Financial institutions and banks can benefit greatly from appropriate use of data and technology. However, the human component remains the most critical here. Big data is useful if the humans who are collecting it know what to look for and how to correctly interpret the recommendations and conclusions. In that sense, technology can play an incredibly useful role, including in our daily life, but only in so much as humans are willing and able to use it.