Crisis and Growth
2023 is shaping up to be a difficult year for the global economy. In addition to the risk of recession (or recessions already underway) in much of the world, Brazil faces a complex political scenario, with conflicting messages about economic policy, fiscal responsibility, and other issues relevant to the functioning of the economy. In addition, we continue to see inflationary pressures, and the consensus among analysts and the market in general is to maintain the basic interest rate at a high level, which makes it difficult for companies to invest.
This complex economic scenario generally translates into lower growth projections for most sectors. The data market, however, has some counter-cyclical characteristics that create the possibility of strong growth not only for 2023, but also for the following years.
The main application of data and kuwait whatsapp number code information in business operations today is in process optimization, in what is conventionally called “digital transformation.” This optimization involves the application of information, whether through rules, reports, or even artificial intelligence (and we’ll talk a little more about this in a moment), to automate processes and reduce the amount of work that needs to be done by people. In most cases, this translates into cost reduction and a very positive return on investment. Thus, in times of budgetary constraints, the tendency is for companies to seek more, not less, automation, which directly leads to an increase in the consumption of data and related technologies.
The second characteristic has to do with specific applications and the verticals that are the biggest consumers of data in the market today. Two of the main uses of data in the market today are decision-making related to granting credit and fraud prevention. In times of economic crisis, both companies and individuals tend to seek more credit from financial institutions, causing the volume of credit analyses to increase significantly. Likewise, the incidence of fraud tends to increase when the economy slows down and more people become unemployed, which translates into a greater need for tools and processes to mitigate these risks. In both cases, one of the consequences is an increase in the demand for data.
Thus, despite the difficult moment when we look at the macroeconomic environment, the data market has a positive outlook, with several factors that should drive its continued growth.
New Entrants
Around the world, we are seeing more and more companies entering the data market, directly or indirectly. Here in Brazil, in addition to the significant movement of B3 entering this market with its recent acquisitions, we are also seeing the entry of new international players into the market through the purchase (in whole or in part) of local companies. From the investment made by LexisNexis in Quod to the offer to buy Boa Vista by Equifax, these movements demonstrate the interest of large international data companies in Brazil, and reinforce the importance of our country in this market.
And it’s not just the movement of large companies that we’re seeing the entry of new players. Throughout 2021 and 2022, dozens of new startups focused on the data market have emerged, operating mainly in specific information niches. These companies generally bring to the market information from specific sectors of the economy (such as real estate or advertising), or solutions that apply data from different sources to specific verticals (such as due diligence or financial analysis of companies).
The significant growth in demand for data around the world has led even companies that are not directly involved in the data market to create related offerings. Financial institutions, technology companies, industries and more have been offering specific data they have, or products built based on their proprietary information, in Brazil and around the world. This is a trend that is expected to expand, as this type of service can be an important alternative source of revenue at a time of economic complexity.
With all these tailwinds, the increase in the number of participants in the data market is only expected to accelerate in 2023 and the coming years.
AI, AI and more AI
As we have said before, artificial intelligence continues to be one of the most efficient ways to extract value from the information and data that companies have in-house or that they can acquire on the market. The popularity of models based on generative artificial intelligence, such as Dall-E (for creating images) and GPT-3 (for generating text), has once again captured the imagination of people and companies about what is possible to do with these technologies, and we are seeing the emergence of dozens of companies applying the same concepts in specific market niches.
The fuel for any artificial intelligence model is data. Large volumes of high-quality data are, and will continue to be, widely sought after by all companies that want to incorporate artificial intelligence into their operations, whether to achieve better results, reduce costs, or simply to bring an image of innovation to their brand.
This growing demand for data translates into both increasing investment in technologies for collecting, managing and maintaining internal data – data lakes, data warehouses, and other types of software platforms – and in the acquisition of external data. In many cases, it is precisely external data, or the application of alternative data, that brings the greatest gains to companies, and the search for this information will only intensify.
Along with the search for data, there is also an increasing openness to the application of solutions based on artificial intelligence in companies' operations. If a few years ago there was great concern about the explainability of models, and the use of more opaque techniques, such as neural networks and other computational algorithms, was frowned upon by regulatory bodies, today companies are realizing that these technologies will be increasingly essential to remain competitive in the market.
Artificial intelligence will not solve all the world's problems, and we are at the peak of a new hype cycle for this technology, but, unlike what we have experienced in this area in the past, real business applications are emerging and will proliferate throughout 2023, and in the coming years as well.
Privacy and Regulation
We cannot talk about data in 2023 without talking about privacy and regulation. In 2022, we saw the emergence of important regulatory milestones around the world, as well as more intense enforcement of legislation that has been in force for longer, such as the GDPR. This trend of governments becoming more concerned about data and its different applications is unlikely to change.
In addition to new regulatory frameworks, such as the regulatory framework for artificial intelligence, which has been discussed in the national congress, and national regulations in the United States and other countries, we can expect in the coming year an intensification of actions by regulatory agencies and public prosecutors regarding possible violations of privacy or failures in the protection of individuals' data.
And regulatory action should not be restricted to cases involving personal data, although these are the ones that usually attract the most media attention. In 2022, we saw the European Union use its data protection legislation to take action against the monopoly of large technology companies, such as Amazon and Facebook, and force changes in the behavior of these companies regarding other companies' data, in the context of marketplaces. Other moves, related to the remuneration of local news sources, the protection of small businesses and stores in the digital environment, and related topics, should happen more frequently in 2023 and in the coming years.