How alternative data is changing the financial sector
Alternative data has been touted as the future for many companies. Financial services companies are particularly interested in this area because it has the potential to provide entirely new signals or enhance existing investment strategies.
However, it has always been difficult to understand the scope and meaning of substitute data, as companies in this sector are often surrounded by secrecy. The investment is very competitive as Alpha often depends on the signal strength that other companies can get.
Now the veil has even been lifted a bit. Finally, there is enough data to understand the extent to which alternative data and web scraping have become entrenched in the industry so that we can understand their importance.
What is alternative data and web scraping??
Alternative data is a passively defined term that means anything that is not traditional data. The latter is anything that is regularly published in accordance with regulations, regulatory procedures, or other oversight. In other words, it is all data from statistics departments, financial reports, press releases, etc.
Since surrogate data is negatively defined, not every information source is conventional. While the definition is fairly broad, proxy statements have their own characteristics. In particular, it is often unstructured, exists in a variety of formats (z. B. Text, images, videos) and is often extracted for a very specific purpose.
It takes much more effort to obtain data because of the variety of sources and formulas involved. Data as a Service (DaaS) companies can solve most acquisition problems; however, finding one that has the information you need can be complicated.
Web Scraping and Internal Solutions in Alternative Data Collection
Many companies are resorting to building their own solutions for alternative data. One of the main ways to do this is called web scraping. In short, it is a way to automate online public data collection through the use of bots.
These solutions traverse a starting set of URLs and download the data stored within them. Most bots also collect all URLs stored on the page for persistent crawling. This allows them to hack into many sources within seconds or minutes.
The collected and analyzed data is then delivered for analysis. Some, such as z. B. Price information, can be integrated into fully automated solutions. Other data, like anything from which investment signals can be extracted, is analyzed manually by dedicated professionals.
Web scraping is shaping the financial services industry
As noted earlier, financial and investment services firms have shown a particular interest in web scraping before almost all others. These companies thrive by gaining an information advantage over their competitors or the market as a whole.
In some ways, then, it's no surprise that web scraping is a major player in the financial services industry. So we scanned over 1000 decision makers in the financial services industry in the US and UK to learn more about how data is managed in these organizations.
Image credit: Oxylabs; thank you!
While internal data remains the primary source of insight into all decision-making processes, as expected, it has been nearly overtaken by web scraping in the financial services industry. Nearly 71% of respondents said they use web scraping to help customers make business decisions.
Web scraping and growth trends
Other findings are clearer. For example, while web scraping showed clear growth trends, we didn't expect 80% of survey respondents to believe the focus would shift more to it in the next 12 months. However, these trends indicate a clear intent to change the prevailing data collection methods in the industry.
Finally, there is reason to believe that the power of web scraping is equally impressive. There may have been reason to believe that automated data collection is just a byproduct of the hype. Big Data has long been a buzzword in business, so it seems that some of these sentiments have carried over to web scraping.
Web Scraping Implementation
However, those who have implemented web scraping do not seem to believe that it is just propaganda. More than a quarter of those who implemented the operation felt it had the greatest positive impact on revenue. In addition, nearly half (44%) of respondents plan to invest as much in web scraping in the coming years.
Our results are generally consistent across regions. Since the U.S. and U.K. are major players in this sector, the conclusions are likely to extend to global trends, with some exceptions where web scraping may be more difficult to implement due to legal differences.
The survey only found big differences in how people use web scraping, not whether it's worth it. For example, in the U.S., compliance or scraping the web itself is rarely outsourced (12% and 8% respectively). On the other hand, the UK is more lenient on external administrations (22% resp. 15% for compliance outsourcing and web scraping outsourcing).
Conclusion
While the way data is managed in the financial services industry has been a mystery for many years, we're finally getting a better look at the trends and changes the sector is going through. As we can see, web scraping and alternative data are playing an important role in shaping the industry.
However, I think being a true first-time user of web scraping is just the beginning. Technology and industry are still at a mature stage. Therefore, I strongly believe that we will see many new and innovative developments in data mining and analytics in the financial sector that will pave the way for new web scraping applications.