The volume and breadth of data available in equities markets is astounding, and not all data are created equal.
Recent years have seen:
- Environmental, Social and Governance (ESG) data rise and fall in both demand and quality
- Use of AI interfaces increase, improving the interpretation of collected data using Natural Language Processing (NLP) models
- Improvements to real-time macroeconomic and microeconomic modelling
- And the continued rise of alternative data as an additional measure of company performance
What is alternative data?
Despite transparent company reporting requirements and solid governance, especially for ASX listed companies, traditional financial statements and company disclosures are no longer enough to make informed assessments. Additionally, if advisors in the market all use the same data sources – then it becomes difficult to build a competitive advantage in terms of advisor effectiveness.
Alternative data refers to non-traditional datasets that help provide additional perspective and/or timeliness of company performance. This may include for example 3rd party web traffic, independent measurement methods, social media sentiment towards brands, credit card transaction data and in the case of Fonto – brand level consumer spending insights.
Alternative data therefore provides independent measurement and a ‘sense check’ of company results. The early validation and/or warning of how company performance is tracking enables better business and investment decisions.
Why brand level data matters
Many ASX listed companies report revenue at a group level, or by broad categories, which often masks brand-specific performance. Additionally, official results may take some time to be published, and may not accurately reflect a company’s market share and/or market penetration performance. The ability to see directional movements for key brand performance indicators provides researchers and analysts with more granularity than currently commercially available elsewhere.
The challenges with alternative data sources
Many alternative data sources either:
- Measure a metric that does not correlate directly to company performance, or
- Are heavily skewed to the user base the data was collected from, or
- Are unable to provide the granularity required for company performance measurement.
Ideal data sources provide metrics that are representative of the population , with appropriate measurement science checks and balances built in along the way. Importantly – they measure what matters.
How Fonto collects alternative data
More than 85,000 Australians have shared their daily transactions data with Fonto by connecting their banking and credit card accounts directly to us. This data is weighted against key Australian Bureau of Statistics (ABS) indicators to provide a nationally representative measure of consumer spending with specific brands and categories. It provides longitudinal granularity (ie data collected from the same individuals over time) of spending across:
- Market share
- Market penetration
- Average transaction / purchase value
- Frequency of purchase
- Spend repertoire within a category (ie customer loyalty over time).
Additionally, Fonto has the ability to trigger consumer research surveys to individuals after they have made a purchase with any given brand. This provides insights directly from the customers themselves, and removes the need to rely on recall around when they last made purchases with brands. This in turn improves the overall quality, accuracy and effectiveness of the consumer insights.
