Great article in this weeks Economist on algorithms.  The theme lies in the mind numbing amount of data avalable now, and how mathematics can help solve complex problems, varying from the UPS driver and plane scheduling to Tesco product targetting.

Algorithms | Business by numbers | Economist.com

It works by assigning attributes to each of the products on Tesco’s shelves. These range from easy-to-cook to value-for-money, from adventurous to fresh. In order to give ratings for every dimension of a product, the rolling-ball algorithm starts at the extremes: ostrich burgers, say, would count as very adventurous. The algorithm then trawls through Tesco’s purchasing data to see what other products (staples such as milk and bread aside) tend to wind up in the same shopping baskets as ostrich burgers do.

Products that are strongly associated will score more highly on the adventurousness scale. As the associations between products become progressively weaker on one dimension, they start to get stronger on another. The ball has rolled from one attribute to another. With every product categorised and graded across every attribute, Dunnhumby is able to segment and cluster Tesco’s customers based on what they buy.

Relevance to Bankwatch:
Banks have enormous amounts of data, including transactions, merchant usage, and products used, both at their own bank and at other banks (from the transactional analysis).  Instead of the usual demographic analysis, analytics to solve for patterns within that data could be illuminating, particularly if it is shared with customers, to help them understand themselves, and their own behavioural implications.