Alternative Data Finance

Alternative Data – Changing the Dynamics of Industries

The rapid generation of alternative data obtained through global trade, social networks, emails, financial reports, satellites, geolocation, among other sources has introduced a great new opportunity to improve profits in the market. The correct use of alternative data through machine learning gives companies a fascinating advantage of making better decisions and growing rapidly with valuable information.

Alternative data is gaining popularity among importers, exporters, financial institutions, logistics companies, corporations, law firms, insurance companies, sales & marketing teams, asset management companies, academic institutions, government agencies and other businesses. The industry is expanding rapidly due to the fact that alternative data can give better insights.

  • The global alternative market is estimated to grow from $1.70 billion in 2020 to $2.41 billion in 2021.
  • The market is expected to reach $8.98 billion in 2025.
  • North America was the largest region in the alternative market in 2020.
  • Fund managers are projected to spend more than $1 billion in 2021 on alternative data.

There are many types of alternative data sets; from email receipt data to weather data, pretty much anything is used by investors and other business professionals in their quest to generate alpha. Below are major types of alternative data sources:

  • Global Trade Data: Import export data is useful in many ways; you can track global shipments of companies and find the best business partners. You can visualize data on the basis of market trends, companies’ turnover, industry performance and so on.

  • Digital Data: Digital data is a type of data, containing website traffic of import & export companies and information about their social networking accounts. The data helps global businesses to find right trade partners as per their requirements.

  • Transaction Data: Transaction data of importers & exporters help investment companies, financial institutions and other agencies to estimate their financial position in the market. This data can be generated from shipping bills, invoices, import bills and other documents filled by companies.

  • Web Data: Web data contains website links of import & export companies who present information about their products and business on the Internet. This will help corporations to connect directly with them and analyze their business before going for a deal.

  • Geo Location / Satellite Data: Geo location data is essentially the physical equivalent of online traffic that is used to track movement of goods around the globe. Data collected from satellites or lower-level drones is used to track supply chain disruptions, agriculture yields, construction and oil & gas production. Geo location data or satellite data helps importers & exporters to track movement of their consignment from one place to another. It is also useful to government agencies to monitor any suspicious or illegal trade of goods between companies.

  • Social Data: Social data collected by news agencies, social media platforms and other management communications is used to track every social activity of import & export companies.

  • Sell-side: Alternative data helps sales & marketing teams to generate prospect lists based on product imported, location, sales volume, shipping route and so on. They can combine new data and processing techniques with traditional sell-side research for having better outcomes.

Transforming Finance, Banking & Asset Management Market

Alternative data is the secret weapon for the enhancement of financial information as it provides a comprehensive business overview with a set of decision-making data. It helps decision-makers to make more precise financial strategies. The essential data seamlessly enhances underwriting and risk management criteria and optimizes the user experience.

Alternative data helps banks to differentiate their market strategies, identify changes in markets, optimize workflows, manage business risks better and make better financial decisions.

Leading asset managers rely on alternative data to analyse investment opportunities faster & better and manage risks more accurately. With essential data, they can conduct good research on customer behavior and transactions. They can also increase efficiency and drive innovation & growth.

Defining Future of Corporations

Alternative data is also useful to other corporations like manufacturing, export and import companies to study the flow of goods, study market trends, evaluate the business performance of companies and get an overall picture of global trade developments. They can have informed decisions on the basis of every market aspect and transform their business.

Creating Creative and Systematic Research

Alternative data can offer an edge to market analysts by creating good market research reports on product, industry, HS Code, market trend, importer, exporter, brand, model, international trading countries, and price of product, value & quantity of the product and so on.

Integrating Information Into Investment Opportunities

Investment management companies are increasingly using alternative data in financial services such as mobile geolocation data, satellite imagery, geospatial information, weather reports, and social media. It helps them to gain insights that are useful to take investment decisions for generating returns for investors.

Alternative data can be utilised in pre-trade investment evaluation as well as to assist investors in monitoring the financial health of a firm, industry, or nation. Hence, that important data can help unlock value in various areas such as investment advisory, private equity, real estate, and portfolio management.

Data-Driven Mergers & Acquisitions Decisions

Alternative data is used in M&A due diligence process to improve accuracy and speed it up. It includes firmographic data such as category, industry & size that can help you in the initial states of selecting potential target companies. Company employee reviews help you obtain a clear and objective insight into your selected company’s workforce.

That significant data also includes company funding data that allows you to access the specific investment stages and amounts raised by your target company. Hence, alternative data is useful in knowing information about companies that are under the process of mergers & acquisitions to get better insights. 

Alternative data is the latest buzzword in the big data industry. The use of alternative data is the clear future of the financial, banking, investment, and other industries. It’s more up-to-date, more extensive and a better indicator of decision making than many of the traditional sources have been around for years.

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