On the heels of Envestnet's multimillion-dollar acquisition of big data hub Yodlee, three banking giants are reportedly planning to jointly build a data management company.
A tie-up between J.P. Morgan Chase, Goldman Sachs and Morgan Stanley to launch SPReD, a business focused on data management, underscores again the value that banks and wealth management firms now perceive in analyzing and controlling real-time transactional data.
The traditional rivals are each investing more than $1 million in the project, which will allow member companies to "create a stream of consistent data that banks use to help determine pricing and transaction costs," according to The Wall Street Journal.
SPReD, otherwise known as Securities Product Reference Data, is expected to launch within six to 12 months, the Journal report stated. By joining hands, the participants believe they can drive down data management costs while boosting data quality.
The individual firms did not immediately respond to requests for additional comment.
Prodding the firms is the immediate opportunity to monetize customer transactional data that traditionally was used by banks for archival purposes, says Morgan Downey, CEO of Money.Net, a market information platform startup.
"These banks are realizing that if they can turn their internal data into real-time reports and people will pay a lot for that data," Downey says.
The immediate targets of such consolidation, he says, are financial data firms such as Thomson Reuters and Bloomberg, which aggregate and re-package market data derived from banks and wealth management firms, selling it on market display terminals and reports.
"This is about eliminating the middle man," Downey says.
Information control is another motivation, he says. "This data is core to what these financial institutions do. Being aware of the transactions their customers are engaging in helps them do their current jobs a whole lot better. So, any data that's core to the business you want to keep as close as possible to the firm. You dont want someone else getting that data before you do."
And the $660 million that Envestnet recently paid to acquire Yodlee's massive data stores of bank accounts, investments and payments from over 14,000 sources is still fresh in every executive's minds, Downey adds.
"It was validation that banks' internal transactional data has a true market value," he says. "You can do all sorts of insightful market analysis when you have data in real time -- buying, trends and investments in assets. The Yodlee deal put a number on that."
SmartStream Technologies, a software and managed services provider, is central to the SPReD startup effort, according to published reports. The company currently serves 70 of the world's top 100 banks, focusing in such areas as post-trade processing, data management, and trade acceleration services.
Amid the data quality and cost opportunities, the SPReD launch also raises a range of questions. So far, the member companies have not described how much data -- and what types of data -- SPReD will manage. Nor have the member companies publicly described master data management (MDM), data governance or compliance considerations.
- In Wealth Management, Big Data Means Big Deals
- In Robo Arms Race, Envestnet-Yodlee Deal Ups the Ante
- The Advantage of Data-Driven Financial Advice