Alternative data is information gathered from non-traditional sources which can be used to inform strategic and operational decisions within a firm (including helping facilitate investment strategies). Often arising as a byproduct of other organizational or behavioral processes, alternative data provides insights into corporate and economic performance unavailable from more traditional financial data, thereby innovating the search for alpha.
A 2022 study valued the global market for alternative data at $4.4 billion, with significant growth expected in the medium term.* This growth is attributable to the granular insights that such data offers investors and other institutional bodies. Telecommunications data is a valuable piece of the alternative data market. In the same way that telecommunications bridge the physical distance between people, telecommunications data bridges the informational distance between organizations and the communities they serve. Due to the widespread adoption of mobile smartphones and the breadth of functionality afforded by them, the data derived from telecommunications devices is rich and diverse, offering insights into an array of consumer behaviors. Yet, despite its promise, many firms struggle to effectively utilize alternative telco data.
Alternative telecommunications data can be broadly categorized into mobility and non-mobility data. Mobility data focuses on the movement and location of individuals, providing insights into consumer behavior, foot traffic, and demographic trends. Non-mobility data offers insights into device activation data, web and app usage, in-app spending, data consumption or device preferences among others.
These different types of data have broad financial applications. Whether collecting call or SMS records, roaming location, internet usage or network logs, the insights garnered can inform both lending criteria and investment decisions. For instance, in some jurisdictions, the penetration of mobile telephones far exceeds that of bank accounts. As such, telco data provides an excellent source from which to interpret an individual’s suitability for credit, augmenting or replacing the well-established methods of banks. The data available reveals socioeconomic and behavioral characteristics which, in the absence of traditional financial information, can help lenders determine the risk associated with issuing credit to an individual.
Telco data also has several applications within the investment process. For instance, geolocation data can be used to measure the footfall enjoyed by blue chip retailers following a major product release or announcement. Furthermore, app download and usage data offers valuable insight into:
- The relative success or failure of digital products and services
- A user’s online journey before making a purchase
- In-depth competitor analysis to understand winners and losers in a particular sector
Access to this data prior to official disclosures being made to the market can provide investors a trading edge.
Knitting alternative telecommunications data into existing processes can prove a time consuming and complex task. The SigTech platform allows for the seamless ingestion of alternative data to complement our existing financial and economic data repository. Using our innovative data validation engine (DaVe), these datasets can be scanned for errors and inconsistencies and cleaned by our specialist data engineering team. Once onboarded and operationalized, the SigTech platform facilitates the sophisticated analysis of these datasets and their utilization in the construction of trading strategies.
* https://www.grandviewresearch.com/industry-analysis/alternative-data-market
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