Alternative Data Market - Global Outlook & Forecast 2024-2029

ALTERNATIVE DATA MARKET ANALYSIS

The alternative data market was valued at USD 6.27 billion in 2023 and is projected to reach USD 79.22 billion by 2029, growing at a CAGR of 52.61% during the forecast period. This rapid growth is fueled by the rising demand for actionable insights derived from unconventional data sources, which go beyond traditional financial metrics and economic indicators.

Alternative data, encompassing sources like satellite imagery, web traffic, social media activity, sensor data, and credit/debit card transactions, is now a cornerstone for industries such as financial services, retail, e-commerce, and advertising. In financial services, investors and hedge funds use alternative data to enhance alpha generation and improve risk assessment. Meanwhile, in the retail sector, businesses leverage insights from consumer behavior and social media activity to optimize marketing strategies and elevate customer experiences.

Advancements in technology, particularly in data processing and analytics, have made the aggregation and analysis of alternative data faster and more efficient, accelerating market growth. The increasing emphasis on data-driven decision-making by businesses across industries further underscores the importance of alternative data as a critical tool for understanding market trends and consumer behavior.

Regional Insights and Market Trends

In 2023, North America held the largest share of the alternative data market, driven by the presence of leading data providers and substantial investments in technology by financial services firms. Europe and the Asia-Pacific (APAC) region are also experiencing robust growth as businesses recognize the strategic value of alternative data for predictive analytics and decision-making.

The APAC region, in particular, is benefiting from rapid digital transformation, the proliferation of smart devices, and improved connectivity, creating a fertile environment for alternative data generation. E-commerce growth and digitalization in retail and marketing further amplify demand, as companies strive to understand real-time consumer preferences and behaviors.

Despite challenges such as data privacy concerns, complex data integration, and high costs associated with data collection and advanced analytics tools, the market's outlook remains highly optimistic. Organizations are increasingly prioritizing solutions to overcome these obstacles, leveraging alternative data for competitive advantage.

The Role of Alternative Data in the Evolving Data Analytics Industry

The global data analytics industry is undergoing a transformative shift, with alternative data emerging as a pivotal driver of innovation and value creation. As businesses move beyond traditional datasets, they tap into alternative data for more granular insights into customer behavior, market trends, and investment opportunities.

In regions like North America and Europe, regulatory frameworks around data privacy and usage shape market dynamics, challenging businesses to navigate compliance while maximizing value. Meanwhile, in APAC, the rapid adoption of digital technologies and a burgeoning ecosystem of data generation are driving the growth of alternative data applications.

As the demand for real-time analytics continues to rise, data sources such as transaction data, web scraping, and geospatial information are becoming indispensable across industries. However, small and medium-sized enterprises (SMEs) often face hurdles due to the high costs of data collection and the need for sophisticated analytics tools. Addressing these challenges will be essential for unlocking the full potential of alternative data and fostering its integration into diverse industry verticals.

ALTERNATIVE DATA MARKET TRENDS

Integration of Technology

Technology integration in the alternative data market is rapidly transforming investment strategies, especially through emerging AI applications and the growing use of geospatial and satellite data. Further, AI is increasingly being adopted to analyze alternative data, allowing investors to process vast and complex datasets efficiently. In 2023, more than half of investment firms surveyed reported using AI in either an evaluative or operational capacity, with a growing number planning to increase investments in AI through 2024. AI's ability to derive insights from non-traditional sources, such as credit card transactions and mobile data, revolutionizes decision-making in hedge funds, private equity, and venture capital. The use of generative AI, in particular, has accelerated, enabling firms to extract actionable insights from the immense volumes of alternative data available. This capability is becoming essential in a competitive market where investors seek to gain an edge by leveraging unconventional datasets.

Expansion of E-Commerce Industry

The e-commerce industry is experiencing rapid global growth, with new markets emerging and established ones reaching new milestones. Expanding through e-commerce enables businesses to reach new territories locally or globally and explore new product lines based on the demand from different target audiences. This expansion can occur through various channels, including major marketplace platforms like Amazon or individual company websites. The potential benefits include easier establishment in new locations, increased brand awareness, and direct access to new consumer markets. Furthermore, concerning the alternative data market, the expansion of e-commerce drives the need for enhanced data analytics and insights. As e-commerce platforms gather vast amounts of transactional and behavioral data, businesses can leverage alternative data sources to gain a competitive edge. This includes analyzing data from social media, online reviews, and market trends to understand consumer preferences better and improve decision-making.

INDUSTRY RESTRAINTS

Challenges in Data Integration and Privacy

Integrating alternative data into existing business models poses significant challenges, particularly in data quality and relevance. Combining unstructured alternative data with traditional datasets requires advanced analytics tools and expertise, which can be a barrier for many companies. Moreover, data privacy and regulatory concerns are at the forefront, especially in regions with stringent data protection laws, such as the European Union's General Data Protection Regulation (GDPR). Organizations must navigate these legal complexities while ensuring that their data usage complies with privacy standards, which can limit the scope of alternative data adoption. Additionally, ethical considerations around data ownership and consent create challenges in the broader use of personal and consumer-generated data.

SEGMENTATION INSIGHTS

INSIGHTS BY TYPE

The global alternative data market by type is segmented into credit & debit card transactions, email receipts, geo-location records, mobile application usage, satellite & weather data, and other data types. The credit & debit card transactions segment dominates the global market share. Credit and debit card transaction data is one of the most widely used, offering granular insights into consumer spending patterns, particularly valuable to financial institutions and hedge funds. Further, email receipts also play a key role in providing detailed information about consumer purchases and preferences. Geo-location records help companies understand consumer movement patterns and are extensively used in retail, real estate, and urban planning industries. Mobile application usage data offers insights into app interactions and consumer behavior, aiding in marketing strategies and user engagement analysis. Satellite and weather data is crucial for sectors like agriculture, logistics, and financial services, providing insights into environmental factors that affect industries. Other types of alternative data, such as web scraping and social media, also contribute to a holistic view of market dynamics, consumer sentiment, and industry trends.

INSIGHTS BY INDUSTRY

The global alternative data market serves a wide range of industries, including BFSI (Banking, Financial Services, and Insurance), automotive, energy, industrial, IT and telecommunications, and real estate and construction. Each industry leverages alternative data to enhance decision-making processes, improve operational efficiencies, and gain competitive advantages. Other sectors, such as retail, media and entertainment, also tap into this data to uncover industry trends, optimize strategies, and drive growth in their respective fields.

In 2023, the BFSI segment held the largest segmental market share. The BFSI sector has increasingly incorporated alternative data to enhance decision-making, especially in lending, fraud detection, and customer insights. A prime example of alternative data in the BFSI industry is its application in credit risk assessments for "new to credit" individuals or small businesses lacking traditional credit history. For instance, Union Bank of the Philippines developed an AI-powered alternative credit-scoring solution that uses non-financial data to assess creditworthiness. Similarly, Wells Fargo signed a data-sharing agreement with fintech firm Envestnet | Yodlee, allowing seamless data exchange to provide a more holistic view of customer financial health.

INSIGHT BY END-USER

The global alternative data market by end-users is segmented into hedge fund operators, retail companies, investment institutions, and other end-users. The hedge fund operators segment holds the most prominent global alternative data market share in 2023. Hedge fund operators and investment institutions are the primary consumers, using alternative data to enhance portfolio management and trading strategies and gaining insights from non-traditional data sources. Retail companies leverage this data for dynamic pricing, competitor analysis, and trend forecasting. At the same time, other sectors utilize it to optimize operations, make informed decisions, and identify new opportunities in their respective industries.

GEOGRAPHICAL ANALYSIS

The global alternative data market is primarily driven by demand across North America, Europe, and the APAC region, with North America holding the largest market share. North America’s dominance is attributed to the early adoption of advanced data analytics and the presence of a large number of financial institutions and hedge funds that actively leverage alternative data for investment strategies. In this region, regulatory frameworks and the availability of diverse data sources fuel the market's growth. The expansion of data-driven decision-making, particularly in financial services and retail sectors, further contributes to the market's expansion.

Europe follows closely, characterized by growing awareness of the value of alternative data in investment management and business strategy optimization. The region benefits from a high level of digitalization, increasing integration of AI, and strong regulatory support for data usage, particularly within financial markets. The focus on sustainability and Environmental, Social, and Governance (ESG) data also plays a pivotal role in the region’s alternative data market. Furthermore, APAC is experiencing rapid growth in the alternative data market, driven by the rise of fintech companies and increasing digital transformation efforts across industries. The adoption of alternative data in APAC is fueled by the surge in e-commerce, mobile payment systems, and expanding financial services. Countries like China and India are notable for the large volumes of unstructured data generated through online platforms, social media, and mobile transactions. The market in this region is poised to grow as businesses look to harness the power of alternative data to improve decision-making and maintain competitive advantages in dynamic markets.

COMPETITIVE LANDSCAPE

The global alternative data market is fragmented, with a mix of large established players and niche providers. The competitive landscape is marked by both organic growth and strategic acquisitions. Larger firms, particularly those with established infrastructure and advanced analytical capabilities, are focused on expanding their data sources and integrating AI-driven insights. These companies often possess the resources to invest in proprietary datasets, giving them a competitive edge in delivering high-quality, real-time alternative data. Furthermore, the key players in the global alternative data market include Thinknum Alternative Data, YipitData, Quandl (Nasdaq), Preqin, RavenPack, Advan Research Corporation, and M Science LLC.

Smaller companies and niche providers often focus on specific verticals, offering specialized datasets and insights that cater to distinct market segments such as hedge funds, private equity, or retail. As competition intensifies, many firms focus on offering more customizable data solutions, particularly in ESG, consumer sentiment, and social media data. Furthermore, mergers and partnerships are expected to increase in the alternative data market as companies seek to broaden their datasets and improve analytical capabilities. Moreover, as demand for more transparent, ethical, and privacy-compliant data practices grows, there will likely be greater emphasis on data governance and regulatory compliance. The rise of alternative data providers offering ESG-focused datasets will continue to shape industry dynamics, while investment in AI and machine learning to derive actionable insights from vast datasets will be a critical factor for maintaining a competitive edge in the coming years.

Key Development in the Global Alternative Data Market

1. Palantir is expanding the use of its data platforms in mission-critical sectors like government, healthcare, and finance.
2. 1010data is strengthening partnerships, like the recent collaboration with Colateral in 2023, to enhance data capabilities and expand market reach.