Alternative data has been seen as the future for various companies. Financial services firms have been particularly interested in this area because it has the potential to provide entirely new signals or improve existing investment strategies.
However, understanding the scale and importance of alternative data has always been a challenge as businesses in the field are often shrouded in mystery. Investing is extremely competitive as alpha often depends on signal strength that other companies can get.
Now, however, the curtain has been lifted, even if only a little. Finally, there is enough data to understand how far the alternative data and web scraping tools have entered the industry, allowing us to understand their importance.
What is alt data and web search?
Alternate data is a term that is negatively defined to mean anything that is not traditional data. The latter is considered to be anything that is regularly published under regulation, government action, or other scrutiny. In other words, it’s all data from statistical departments, financial statements, press releases, etc.
Since alternative data is negatively defined, it is any source of information that is not a traditional source. While the definition is somewhat broad, alternative data has its characteristics. In particular, it is almost always unstructured, comes in a variety of formats (e.g. text, images, video) and is often extracted for a highly specific purpose.
Data collection is significantly more complicated because both the source and format are different. Data as a service (DaaS) businesses can solve most of the problems associated with acquisitions; however, finding one that contains the necessary information can be complicated.
Web Scraping and Internal Solutions for Alternative Data Collection
Many companies turn to building in-house solutions for data collection instead. One of the main methods to do so is called web scraping. In short, it’s an automated method of collecting online public data using bots.
These solutions go through a set of URLs that start and download the data stored inside. Most bots will also crawl any URLs stored on the page for further crawling. As a result, they can glow through multiple sources within seconds or minutes.
The collected data will then be distributed and parsed for analysis. Some of it, such as pricing information, can be integrated into fully automated solutions. Other data, such as anything from which investment signals can be extracted, is manually analyzed by dedicated professionals.
Web scraping is shaping the financial services industry
As mentioned above, financial services and investment companies have been particularly interested in web search earlier than anyone else. These businesses thrive when they gain an information advantage over their competitors or the entire market.
So, in a way, it’s no surprise that web scraping has turned out to be an important player in the financial services industry. So we surveyed more than 1000 decision makers in the financial services industry across regions of the US and UK to learn more about how data is being managed within these companies.
Image credit: Oxylabs; Thank you!
While internal data is, as expected, still the primary source of insights for all decision-making, web-based data collection has almost surpassed it in the financial services industry. Nearly 71% of our respondents indicated that they use website search engines to help customers make business decisions.
Web Development and Crawling Trends
Other insights are even more illuminated. For example, while web search shows a clear upward trend, we do not expect 80% of survey respondents to believe that the focus will shift to it much more in the next 12 months. However, these trends show a clear purpose to change the dominant data collection methods in the industry.
Finally, there is reason to believe that the performance of web scraping is equally impressive. There may be reason to believe that automated data collection is simply a byproduct of the hype. Big data has been a business buzzword for a long time, so it looks like some of that emotion may have shifted to web searching.
Deploying Web Scraping
However, those who have done web scraping don’t seem to think it’s pure hype. More than a quarter of those who have implemented the process believe it has the most significant positive impact on revenue. In addition, almost half (44%) of all respondents plan to invest the most in web search in the coming years.
Our overall findings are consistent across regions. As the US and UK are key players in this area, the conclusions can extend to global trends, with some exceptions where web searching can be difficult. performed more due to legal differences.
The survey only found major differences in how web scraping was handled, not whether it was worth it. For example, in the United States, it is rare that web compliance or self-correction is outsourced (12% & 8%, respectively). The UK, on the other hand, is much more tolerant of outsourced parts (22% and 15% respectively for outsourced web auditing and compliance).
Inference
While the way data is being managed in financial services While the industry has been shrouded in mystery for years, we finally have a better look at the trends and changes the sector is going through. As we can see, web data and alternative data play an important role in shaping the industry.
However, I think being the first to actually use web scraping is just the beginning. Both the technology and the industry are still evolving. Therefore, I am confident that we will see many new and innovative developments in data extraction and analysis in the financial sector, where new web scraping applications will lead.
Image supplier: Pixabay; Bark; Thank you!
