Hamza Khan is the head of European Data at Nasdaq’s Quandl, a marketplace for financial, economic and alternative data delivered in modern formats for today’s analysts. Based in Amsterdam, Khan joined Quandl in 2020 and is responsible for leading Quandl’s data strategy and expanding its presence in the European market.
Here he speaks to The Fintech Times about alternative data, its benefits to investors and how regulation as affected its uptake in Europe
What is Alternative Data?
At its core, it’s a new name for something basic, which is market research. We want to understand which companies are performing well, which products are selling and what consumer trends are taking place. So, for example, is Tesco or Sainsbury’s more popular? Are people using Uber Eats or other delivery services? Are they watching Netflix or Disney? This kind of market research has been going on for decades, but what makes it alternative is that the data is being collected digitally. Market research is traditionally done through surveys asking people what they’re purchasing etc. But by going digital we keep that same level of anonymity but make it faster and more accurate. So, for example with PSD2 and user consent, we can see where spending is taking place in real-time, instead of having to wait for surveys to be carried out and analysed.
There’s nothing radical about alternative data. It’s just a faster, more accurate way of collecting market research.
Is this kind of data valuable to investors?
Absolutely, and that demand stretches across the board. There is a huge amount of demand for the data that’s out there when it comes to companies deciding what products to launch or what companies to invest in.
How does this affect Start-ups?
As I mentioned, what’s different about alternative data is that it’s collected digitally, and start-ups are really at the forefront of this. They’re the ones who are building services on the cloud and putting data first.
We see that a lot of the companies that were start-ups a few years ago, that have maybe now turned into scale-ups or unicorns, have really strong systems in place which enabled them to transform their data into a new source of revenue.
How easy is it to transform these data streams into sources of revenue?
Everyone already has this data, using it for their internal analysis or for their own market research. So, the data is sitting on a server somewhere, and it’s often just a turnkey solution, connecting it to a service like Quandl, to make it into a viable revenue stream.
That’s why we call this bottom-line revenue, where it doesn’t entail a lot of costs, work or any new infrastructure from our suppliers. We try to make it as turnkey and simple as possible.
What demand is there for alternative data?
There’s a lot of demand from investors and companies that want to know what’s happening in the world around them. I think that’s been the case for decades, market research has been happening since the 1920s and 30s. There’s a number of very large companies that are out there that are doing this already, so we took the start-up mentality of how can we do this better, faster and cheaper.
How up to date can these data sets be?
Because of the shift towards cloud technologies the speed of data collection processing has increased drastically. We’ve gone from data being released and collected quarterly to monthly to daily to now being collected multiple times a day. And of course, the faster people see data the more value it has.
How detailed can this data get, and does the detail depend on where it was obtained from?
Different sources have different formats, but it’s very important to state that no matter how detailed it gets there’s never any personal information that’s ingested, processed or shared. Frankly, that’s the furthest data point from what we touch – what we want in detail is actionable data related to companies. For example, if you’re able to say that X amount of money was spent on airlines in July, that detail has some value. If you’re able to say that X amount was spent on airlines on July 1st, that adds more value. If you know that X amount was spent specifically on British Airways on July 1st, that’s even more valuable again. The more detail it has the more value it has.
Do strict European regulations, like GDPR and the FCAs banking regulations, play a part in how data is captured? Does it make it more difficult?
Alternative data and data monetisation originally took place in the US but is now becoming more and more global. I’ve been in the industry for several years and I’ve really seen a change in attitudes. When I spoke to companies in 2017, everyone was hesitant to share data because they weren’t sure about GDPR, it was a new regulation at the time so there was a lot of hesitancy on how to implement it.
When GDPR came in it was actually quite clear, and by 2019 when the regulations were understood people were slightly more accepting of the possibilities and legality of data monetisation – but no one thought it would fly in Europe. In the US people tend to think about data differently than they do in Europe, and so no one thought European companies would do it.
But of course, in 2019 and 2020 it started happening. European companies started monetising data and doing it safely and anonymously with respect to their customers and the regulations. Now there’s a number of European neobanks, start-ups and fintechs who have been monetising data for years now. I think that’s where there’s been a complete shift of the tenor of how people think about European Data. Companies may not be ready to do it, but they want to explore it and find out more. They see some of the biggest names in fintech using this new revenue stream and they want to know about it.
What do you think is the future for datasets, are companies going to get swamped by data?
Well, we think that we can never have too much data. There are so many interesting revenue opportunities available to create safe and manageable data sets. The way people think about data monetisation is always changing, and it’s always being used in new ways, but Data is a diverse way of increasing your revenue streams.