UBS has taken a major step towards big data, an area viewed with great promise by almost all banks.
Big data is the new buzzword among financial firms, which are eager to get their arms around the arsenal of personal information on their clients. Most banks have until now been ham-handed in their attempts to follow through.
«The client may not feel he or she is being spied on, otherwise we will very quickly lose their trust,» as UBS Chairman Axel Weber put it. His bank is now forging a path towards becoming a big data provider: UBS is giving one of its its most closely-watched innovations, UBS Evidence Lab, more leeway.
Limited Reach
The project has raised eyebrows for its (unsuccessful) attempt to call the winner of this year's World Cup tournament, dissembling an electric car in order to better understand Tesla, or delving into U.S. President Donald Trump's tweets to understand his trade views.
The Evidence Lab mainly provides other UBS research departments with studies and answers to specific questions from within the bank. This was an ultimately frustrating experience for the researchers, since of 3,000 reports produced this year, only a fraction made it to clients.
Analysts Pressured
That's about to change: the lab will become a sell-side analyst boutique in order to appeal to a far wider audience, according to finance portal «Institutional Investor». The researchers hope to parlay their award-winning work into profits.
Traditional brokerage analysts are under pressure since European MiFID II rules which require payment for research came into effect. Clients will tend to buy research outliers, not herd views. Big data-based analysis probably clears the bar for added value. The spin-out from UBS' research department affords the lab more flexibility, a decisive factor for innovation.
