Using Data-Driven Insight to Drive Business Strategy and Spur Growth

Eric Aboaf, Vice Chairman and Chief Financial Officer, State Street [NYSE: STT]

Eric Aboaf, Vice Chairman and Chief Financial Officer, State Street [NYSE: STT]

The world of financial services has become all about data. Managing, analyzing, and standardizing mountains of data from across hundreds of platforms in order to gain investment insights is the job. It’s a job that needs to happen more quickly, rigorously, and efficiently than ever before in order to enable investors to make better, more informed decisions and identify emerging risks and new opportunities.

Through State Street Associates®, our academic and financial research arm, we have been on a years-long journey to distinguish our research as a true differentiator for clients, using data drive and insight to drive business strategy and spur growth. As one of the world’s leading custodian banks—responsible for nearly 10%, or $40 trillion, of the world’s assets—State Street offers its clients a unique perspective into the capital flows of institutional investors. The patterns we can discern from this vast dataset can present “headwinds and tailwinds” in markets that are important for investors to understand as they look to make better-informed investment decisions. Among the data-driven tools we have made available to clients and the general public to help investors connect the dots and inform their decision-making are:

● PriceStats®, our inflation-tracking tool and the world’s leading source of high-frequency inflation analytics in 25 countries worldwide, including the U.S. and Canada. This data is a leading indicator of CPI releases and is followed by our clients, the Federal Reserve, and other central banks and government treasury departments worldwide. PriceStats data proved especially valuable to clients and policymakers over the past several years as it helped them better manage inflation risk and make more-informed asset allocation decisions surrounding geopolitical and macro shocks, including the COVID pandemic, related supply chain troubles, and how sanctions against Russia due to its war against Ukraine impacted financial and commodity markets.

● Last year, our markets and financing business launched three industry-first, publicly available data-driven indicators for institutional investors—including the Institutional Investor Holdings Indicator and Institutional Investor Risk Appetite Indicator—that provide unprecedented insight into the aggregate portfolio allocation of some of the world’s largest asset owners and asset managers. This a big deal worth getting excited about because these indicators draw upon State Street’s vast, aggregated, and anonymized data set to offer a fact-based alternative to traditional polls and surveys. In other words, the indicators capture what many of the world’s largest institutional investors are actually doing rather than what they say they’re doing and, for the first time, making market flow bellwethers available to media, policymakers, and investors.

"If the unspoken mantra in financial services for years has been, “It’s the data, stupid!” I suspect that we’ll all be focusing on moving up the data-driven value chain in the years to come”

We’ve also, over several years, invested in Large Language Models, the same technology behind ChatGPT, to scan millions of digital and social media posts each week and gauge market sentiment around stocks and also key economic themes such as inflation, recession, onshoring, and fiscal sustainability in the U.S. Our State Street MediaStats Central Bank Indicators and State Street MediaStats Thematic Indicators can help you understand what news—which narratives—have the potential to drive risk and returns in your portfolios and for your firms.

These data and analytics tools help CFOs perform their work. We use the same data and analytic business tools in our core financial function to forecast business results and create insights, estimate client volumes and activity highlight mix changes to identify market growth opportunities, and leverage various macroeconomic indicators to estimate revenue results. We realign our hiring needs in relation to both new business and productivity indicators and leverage large data sets to monitor accruals and potential errors.

If the unspoken mantra in financial services for years has been, “It’s the data, stupid!” I suspect that we’ll all be focusing on moving up the data-driven value chain in the years to come. Paired with indispensable, high-touch human insight and expertise, tech innovations, including Artificial Intelligence (AI), cognitive computing, and machine learning, will allow us to move faster and more efficiently than ever before from raw facts to information (or, data that’s been scrubbed and can be measured and categorized—from information to knowledge (adding context and relevance around how various bits of information connect)—and from knowledge to wisdom (or applied knowledge, the good things that happen when knowledge is met with experience, discernment, and emotion).

As a result of our technology-led environment, the CFO community is in a position today to do more for their companies, employees, and shareholders than ever before. The deeper we go into data—and the more enriched and unique analytics and insights we can extract—the more valuable we can be as finance professionals for our businesses, partners, and other stakeholders.