Is data really the new oil?

Data, they will have you believe is the new oil. But is it really? Could it meet the same fate that oil faces presently? Because, for a few years now, the fortunes of oil producing countries has been uncertain enough for many of them to have to look beyond oil revenues.  

Oil is gold, black gold they called it. While gold has climbed new highs, black gold has been finding new lows to plunge to. The general consensus is that it is unlikely for it to go back to its days in the sun. If this is the fate that has befallen oil, are comparisons equating data with oil even meaningful?

It happened not long ago. In the immediate aftermath of the breakout of the Covid19 pandemic, the government of India wanted to find out who manufactured PPEs in the country.

You would think that with GST having been around for a while, the government would be able to access such data at the press of a button. Because in its GST filings, a company is required disclose what it makes, how much of it and for whom. You could therefore be justified in thinking that it should not take the government more than a few minutes to run a simple query to find the answers. But that’s not how it turned out.

What the government did instead is to ask the industry associations to survey their members to identify who manufactured PPEs. The data would have taken a few weeks to obtain and a few more weeks to collate. In the interim, precious time was lost.  

Data is valuable but not just for data’s sake. Instead, data is valuable for what one can do with it. Data is valuable for the uses it can be put to, for the applications that can be built with it. If used well, data is better than oil. If it remains unused or worse yet, unusable, it is much worse than even tar, the heaviest thing to emerge when crude oil is refined.

A lot of data is collected for sure. But much of it remains unusable or unused. It remains unused because it is frequently unusable.

India’s banking regulator, Reserve Bank of India (RBI) has fixed this problem. By recognising the need for data standards for data to be rendered usable. By going on to adopt a reporting standard called XBRL.

An example will help drive home the point.

Banks have always submitted data to RBI about NPAs. In the days of yore, the data would be submitted in physical form, on pieces of paper, neatly typed and tabulated. With the arrival of the computer and electronic storage devices, some banks would have sent it in magnetic devices such as spools of tape and CDs and so on.  While the data may have come in, consuming it was a daunting task. For one, it was time consuming to analyse it. And worse, there was no way of knowing if the data was accurate. Or complete.

I recall a hilarious incident from my journalist days shortly after RBI had introduced the concept of health codes to classify the loan book. The numbers ran from 1 to 8, with 1 being the best and 8 for those in default. The chairman of a very large PSU bank told me proudly that all of his loans were 8, he thought wrongly that a higher number was for better assets, much in the manner of a teacher awarding a higher score to a better answer. His understanding of the measuring scale was different from what RBI intended.

The introduction of CRILC changed everything. It was in 2008 that RBI decided to adopt a data reporting standard called XBRL Within months of the adoption, the quality of data available to RBI improved dramatically. Banks could not hide their NPAs anymore, or lie about it without getting caught within minutes of submitting the data. Evergreening of distressed assets screeched to a grinding halt.. Indian banking was transformed forever.

Conventional wisdom would have you believe that having an online platform is all that it takes. Nothing could be further from the truth. The example of RBI is a case in point. Before adopting XBRL, RBI had what they called the Online Reporting & Filing System or ORFS as they called it. In the words of Mr G Padmanabhan, Executive Director of the Reserve Bank of India, “While ORFS does the job of data capturing and transmission of returns from banks to the Reserve Bank, XBRL enables standardization and rationalization of elements of different returns using internationally recognised best practices in electronic transmission.”

Today, India seeks to go increasingly digital, much attention is being paid to the creation of the hard infrastructure and rightly so. Equally, enough and more is said about how the country will harness the power of AI, Block chain etc, the new buzz words to enter mainstream vocabulary.

Unfortunately, even as everybody is infatuated with applications of data, what does not get enough attention is data itself. Attention needs to be paid to how it is structured for it to permit meaningful analysis. It is not my submission that data is not structured, it is simply that if it were to be structured using appropriate standards, the users of data will have it easier, decision making too will be more efficient.  

XBRL is the way to go.

S Swaminathan is the Founder & CEO of IRIS Business Services Limited, a Navi Mumbai based Regtech serving clients in 40 countries around the world. His twitter handle is @iris_swami 

Company URL: www.irisbusiness.com