How Alternative Data is Changing Investing

On this episode of the Payments Innovation podcast we sit down with Bill Dague a Senior Data Scientist at Quandl. Before he began working with Alternative Data at Quandl he was at financial powerhouse, Nasdaq, before they acquired Quandl. 

The world of data science is changing, for both employees dedicated to working in the quickly growing field, and companies seeking to maximize revenue by leveraging its power through data. 

Growing up, Bill nurtured a strong love for learning about science and data and began his training in physics. From there, he decided that he wanted to specialize in machine learning and data, which led to him working on the data science team for Nasdaq analyzing the emerging world of alternative data. 

We are in a data revolution.

You’re probably aware that data is everywhere. Every time you make a purchase on a cash register POS system at Target, or swipe your card in a Starbucks line, companies are collecting data. Everything about the purchase (except your identity and personal information) is collected and harvested as data. This isn’t anything new. However, alternative data is the next big thing in the data revolution.

In Bill’s opinion we are right in the middle of a data revolution. Companies around the globe are scouring for as much data as they can get their hands on. 

Why?

Because it helps them to differentiate from the competition and get vital analytics on their customer base. 

The quantity of data is increasing exponentially.

So what’s behind this data revolution? 

Well for starters, data has become ubiquitous. Everything a business or individual does is being censored, recorded, and analyzed, so it only makes sense that there is more data floating around than there ever has been. 

However, what many people forget is that storage is also cheaper than it’s ever been, making it easier to cull massive amounts of data to be used later. Machine learning and AI have also made the digital changes occuring in the past several years even more powerful. 

Collectively, all of this change is what’s driving business decisions, and the world has caught on. For example, a few years ago data science as a career path didn’t exist. The new generation is trained to extract value from data, rather than just collect it. They’ve grown up with data being an everyday part of life, therefore they are a little bit better at finding ways to extract and analyze it.

What exactly is alternative data?

Sometimes, the byproduct of data can help companies to sort out the following unexpected benefits:

-new consumer insights

-deeper understanding of consumer trends and habits

-competitive dynamics by industry

-broader overall picture of the economy

Data can come from anywhere, which is why it’s such an important field. Due to the ubiquity of the data available to companies, Bill explains that we are only now just beginning to scratch the surface of how that data can be relevant and useful to companies. For instance, most data is tied up in a small handful of companies. Bill shared that from his perspective it appears that the playing field is about to open up with new emerging companies stepping into the arena.

Alternative data brings in what’s actually happening with products, competitors, and industry insights. For example, Quandl partners with car insurance companies to learn the auto industry and help investors make smarter decisions. This is the beauty behind alternative data. Normal data would just analyze consumer indexes, alternative data digs deeper. 

What is the future of alternative data?

Experts and analysts predict that alternative data will be a $7 Billion industry in the future. 

Quandl understands what investors need and then they go out and find undiscovered data to create unique data products that investors can leverage for a variety of industries. 

Payment companies sit at a critical juncture in the economic flow of things because of what they can offer to investors. 

There is a huge spectrum on returns within the payment and credit card data, for instance. 

Quandl ensures that hedge funds that receive payment data are protected through contractual protection, proper collection processes. For instance, nothing that they collect is going to identify personal data or individual identities. This helps them to work within tight regulations such as GDPR, which enforce strict financial penalties if a company is found to be in violation. 

As a result of companies like Quandl pushing innovation, investors will naturally become more data driven in the future. Because of the emphasis on data, businesses will also become much more data driven as a result. Combined, this will create the potential for a whole new market in financial services. 

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