Financial services companies are increasing their use of  Big Data initiatives to combat fraud according to a recent study conducted by Forrester Consulting on behalf of Xerox.

During the next 12 months, nearly half (48%) of IT and business decision-makers surveyed in the financial sector said they will analyse historical customer data to identify and address potential fraudulent behaviour.

In keeping with this, data security and privacy are cited as the number one challenge for financial services firms (44%) over the next 12-24 months. With the new General Data Protection Regulation (GDPR) set to come into effect by 2017, data privacy concerns likely will become only more stringent for firms going forward.

Craig Saunders, director, Analytics Resource Center, Xerox Consulting and Analytics Services, said: “Detecting and communicating fraud is a huge challenge and a very sensitive one when customer financial data is at stake. More firms are realising the need to invest in technical infrastructures, in such a way that allows them to explore unique customer information, identifying patterns and quickly noticing changes to this. It’s encouraging to see this type of work remains a priority for the coming years.”

The lack of compliance and skill

Beyond targeting the fraudsters, financial services providers also feel challenged by the need to keep up with growing expectations for legal compliance (43%) and reporting (42%).

With this increased need for transparency in financial systems, it is perhaps unsurprising that firms also believe sourcing appropriate data engineering skills (41%) will be a significant issue in the  future. To this end, one third (33%) of total respondents plan to hire more data engineers and data scientists over the next 12–24 months.

But this may only serve to mask the larger issue, as Xerox’s research finds more than two thirds (69%) of FS firms are still encountering inaccurate data in their systems – meaning a comprehensive clean-up may be needed internally before these companies can accurately capture the insights they need within their data.

In the next 12 months, bigger investments in trading & risk analytics (65%) will help to address future fraud detection. But as far as improving existing data sets, the study showed that for financial services firms in particular, 28% of respondents plan to partner with external providers to bring Big Data projects up to speed in the next 12 months.