How a Bank Will Use 'Big Data' To Study the U.S. Economy
What if banks could tap into their vast network of consumer and business accounts to ferret out signals about where the economy is headed?
J.P. Morgan Chase is doing just that with the launch of a new institute that uses "big data"in analyzing hundreds of thousands of accounts for clues about income and spending patterns.
The institute's first report, released Wednesday, offers a deep dive into consumer finances and shows that income and spending remains volatile for the broad middle class, not just the poor.
Researchers tracked the spending and income patterns of 100,000 randomly selected individuals from a sample of 2.5 million accounts at the bank over a 27-month period ended last December. Among its findings: While two in five individuals saw their income vary by at least 30% from one month to another, three out of five individuals saw their spending vary by at least 30%.
The potential dividends from building this data asset aren't lost on Diana Farrell, the institute's chief executive. She learned first-hand about the need for real-time information about household financial behavior as a top economic adviser to President Barack Obama in 2009 and 2010.
"I can't tell you how frightening it was to be in the middle of the debacle of the recession and not have a good understanding of what was happening in the household sector. We were just starving for real-time information."
Diana Farrell, President & CEO, JPMorgan Chase Institute
J.P. Morgan plans to build out its dataset so that it can look back historically, she said. The analyses of account data, which are stripped of any identifying information for bank customers, could help give insight into what Americans did last fall with their gasoline savings, for example.
Other findings from the institute's first run through its data lab:
- Monday is the top spending day of the week and Sunday is the lowest. Americans spend three times as much on a Monday as they do on Sunday.
- Excluding Tax Day, the single biggest day for consumer spending last year fell on March 3, the Monday that followed the single highest earning day of the year, Feb. 28.
- The top 12 days for spending at restaurants and bars fell between Feb. 14 and May 11.
Ms. Farrell said it isn't yet clear how to explain some of those statistics, so stay tuned.
The JPMorgan Chase Institute is a think tank dedicated to delivering data-rich analyses and expert insights for the public good. Its aim is to help decision makers–policymakers, businesses, and nonprofit leaders–appreciate the scale, granularity, diversity, and interconnectedness of the global economic system and use timely data and thoughtful analysis to make more informed decisions that advance prosperity for all. Drawing on JPMorgan Chase & Co.’s unique proprietary data, expertise, and market access, the Institute develops analyses and insights on the inner workings of the global economy, frames critical problems, and convenes stakeholders and leading thinkers. For more information visit: JPMorganChaseInstitute.com.