Data analytics is transforming the field of finance. The growing availability of data and improving ability to analyze data are making finance more and more “data driven.”

Finance has always been a “quantitative” field of business that involves a lot of numbers and math. This has attracted some students to study finance and caused others to avoid it. In the area of investing, financial professionals talk about “fundamental analysis” and “technical analysis” as two different ways to analyze a potential investment. Fundamental analysis focuses on the underlying fundamentals, like the profitability of a firm, whereas technical analysis focuses on the behavior of the security prices, like recent price trends. These are examples of how investors are using financial data and analyzing the data to make investment decisions.

Finance covers a wide range of areas and career paths. For instance, there is corporate finance and personal finance. Companies constantly analyze their financial performance as a benchmark for evaluating their business. Using practices like “cash flow projections” can help the company or its investors to evaluate the future outlook for the business. Individuals are constantly evaluating their personal finances to either borrow or save/invest and manage their financial resources across their lifetime. Wealth management is a important aspect of personal finance that helps individuals with their financial planning and investment decisions. Lending is another area of finance where credit providers analyze borrow characteristics, like the FICO score, to make loan decisions. Ultimately, finance is about moving future income into the present by borrowing or moving current income into the future by saving.

Data analytics has impacted every aspect of finance, but some have been less impacted than others. For instance, some types of banking and wealth management still rely heavily on personal relationships. The corporate banker or the personal advisor still meet face-to-face with their client to discuss various issues and provide trusted advice on various decisions. It is unclear whether these types of human relationships will ever be replaced by computers.

Some areas of finance have been radically changed by data analytics. Here are some examples of areas in finance that have begun to use the growing amounts of data to analyze financial decisions. For some of these areas, the role of the computer has nearly entirely replaced the role of the human. These areas are as follows:

Algorthmic trading is the trading of financial securities based on an algorithm.

Roboadvising is a term for wealth advisory services provided by “robots.”

Online lending is loan origination done online rather than in-person.