How RBC is Disrupting Traditional Market Research with Alternative Data

How RBC is Disrupting Traditional Market Research with Alternative Data

A Recap of the Nowcast > Forecast Webinar

“When you look out in the world, there's just so much data. But what's real? Where's the signal and where’s the noise? When you maximize that ratio, it raises conviction levels.”
- Michael Tran, RBC Capital Markets

In a volatile economy and murky marketplace, knowledge alone is no longer enough. But having the right knowledge that allows you to quantify your theories and demonstrate conviction—that is true power. What if your organization could learn what was happening in real time for issues and markets that have historically been ambiguous and unquantifiable? What if you didn’t have to wait on quarterly reports to plan for the future of your business and clients? 

These are the questions addressed in our recent webinar, Nowcast > Forecast. Our guest speakers were Kevin O'Brien, chief executive officer of Orbital Insight, and Michael Tran, managing director at RBC Capital Markets. Michael leads two strategic platforms at RBC: global energy and Digital Intelligence Strategy. The latter is RBC’s global thematic research arm, powered by data science and alternative data. 

In this article, we summarize the conversation from that webinar and highlight what you need to know about nowcasting and alternative data’s potential to be the breakthrough solution that provides answers to your most pressing questions: 

• Nowcast vs. Forecast (and Why It’s Important) 
• Using Alternative Data as Your Superpower 
• Accelerating Your Business By Nowcasting with Geospatial Data 
• Future Opportunities for Nowcasting: ESG and Sustainable Business 
• Lead From Conviction Based on Data

Nowcast vs. Forecast (and Why It’s Important) 

Michael opens the webinar by defining the term “nowcast,” which was introduced in a recent RBC report titled, “Nowcasting the Consumer’s Propensity to Spend.” He explains that analysts and strategists historically make assumptions based on old data. For example, Wall Street research has been using the same approach for decades—relying on mainstream metrics like labor statistics, inflation prints, non-farm payroll numbers, and similar datasets to predict what the markets will look like next quarter or year. 

The problem is that this data gets stale very fast, and monthly or quarterly reports become outdated almost as soon as they are published. The COVID-19 pandemic exacerbated this problem and left industry experts flummoxed because consumer dynamics shifted drastically. Where people go and what they do has changed so much that the old forecasting tools are rendered almost useless. The world needs new methods to know where people really go—to nowcast—instead of forecasting where we believe they are based on past behavior. 

The key factor in nowcasting is geolocation data. This information is the new currency because it helps organizations understand where people actually are, at any given moment. Quantifying behavior shifts with accuracy—versus relying on self-reporting or projections—reveals data patterns that are critical to understanding market behavior. Nowcasting is the new truth and new gold mine of data. 

“We've spent the past two years trying to forecast the rebound from the pandemic and what the financial markets will potentially look like,” said Michael. “We've all done a lot of guesswork about whether it feels like global mobility is improving, or feels like a restaurant is busier than it was last month. But what if we could quantify that in real time instead of forecasting the future? 

“Let's forget forecasting. It's all about nowcasting, and understanding what's happening on the ground floor, in real time."

“We've been able to leverage Site Intelligence, powered by Orbital Insight, and the geospatial intelligence data it provides to create our own datasets and “nowcast” societal behavior in real time. This includes anything from a behavioral perspective that matters to global markets.” 

Kevin followed up by saying, “The new type of analysis that’s coming from RBC is the future. And it's not only the future of providing better insights, but providing them now. [Nowcasting] compresses time to look at what's happening in markets and make sense of it faster. And that speed is vital to make important decisions, especially financial decisions.”

Using Alternative Data as Your Superpower 

RBC has invested in Orbital Insight’s platform to make “alternative data” its superpower for nowcasting. The platform manages and integrates a variety of data types, using advanced algorithms to answer your questions about the movements of people and assets around the world. As Michael and Kevin discussed: 

• Traditional sources of data are being disrupted. Michael and his team are upending the standard methods of gathering data used by Wall Street research and others. Instead of waiting for periodic reports from businesses or the government with stale and retrospective information, geospatial intelligence platforms help organizations infer economic impacts by providing current data about on-the-ground behavioral patterns. 

“RBC has dedicated an entire vertical to uncovering and quantifying societal behavior in real time,” Michael said. “Our partnership with Orbital Insight has been a complete game changer and a massive accelerator for how we conduct our research. Using the Supply Chain Intelligence solution, we've tackled some very ambitious themes in short order: port supply chains, gasoline consumer demand, retail traffic. These are major cornerstones of the U.S. and global economic market, and we’ve been able to unpack them in real time.” 

• Data deluge is becoming manageable. As big data overwhelms most companies, the computing power of AI-driven analytics platforms make it possible to compare what is happening at a single place, around a place, and between many places—at scale and in real time. In essence, the platform can help you tell the most comprehensive story about patterns of life anywhere in the world, in a way that is unprecedented. More importantly, organizations can create their own datasets and KPIs based on what matters to their markets. 

For example, analyzing data from thousands of retail sites would have taken months (if not years) not long ago. Now, this scale of data can be analyzed quickly—with the right analytics platform. 

“We've amalgamated a mosaic of data from over 100,000 US gas stations in real time, which is an incredibly vast resource,” Michael explained. “We're always looking for weekly, even daily, inflection points to guide us in building out that mosaic to determine what we need to know now.” 

• Conviction supersedes assumption. Real-time geospatial intelligence helps you identify risks and opportunities faster, which then accelerates decision-making. And using the most recent quantitative data means you’ll operate with a high degree of conviction, giving you an edge when trying to keep up with the pace of change in the markets. 

Michael emphasized the point, saying, “Historically, investors have valued differentiated research when making decisions. But what clients, investors, and capital markets really want is something that’s high in conviction.”

Get the Report | Quantifying the Pace of Global Supply Chain Disruptions

Accelerating Your Decision-Making By Nowcasting with Geospatial Data 

Using the Site Intelligence solution, RBC has gained granular visibility, behavior analytics, and insights about customers and competitors in various locations, helping them nowcast for specific market themes. In the webinar, Michael and Kevin outlined how geospatial data can accelerate your business: 

• Improve Signal-to-Noise Ratio: Volatile markets mean that the world is becoming increasingly noisy with data and it’s hard to differentiate the red herrings from what really matters. With geolocation data, you can learn the real signals of economic behavior and gain the conviction to make decisions, while ignoring the “noise” (such as, qualitative data from consumer sentiment surveys) that points toward different trends. Increase 

• Speed to Insight: Geospatial intelligence technology computes more data, faster, from ever greater sources of sensors and inputs, which dramatically compresses time to value. When companies and organizations receive insights near instantaneously, they can spot inflection points in real time to “nowcast” markets or develop new ideas. 

“From a time compression standpoint,” Kevin said, “we're seeing a radical change. There’s an entirely new generation of services that provide near-real-time data. For example, Orbital Insight can process insights and deliver them to our clients in literal minutes or hours. Our geospatial intelligence brings in a variety of different sensors—whether it's satellites, anonymized geolocation devices, or shipping devices—to provide better insight into what's happening on and to the Earth. And it's not the future; it's right now. Michael's team is at the forefront of this, showcasing what is actually happening in the economy, as it happens.” 

Michael elaborated, saying, “What’s really important in terms of our digital intelligence strategy is identifying the needle-moving ideas for a particular market. We want to understand those inflection points and drive toward them with conviction, using new approaches and types of economic data.” 

• Clarify Murky Market Dynamics With a Ground-Level View of Economic Activity: No more opaque markets—you can now access data to read markets at a local level, on a global scale. Whereas global investors historically may not have had a good grasp on what’s happening in different areas of the world or supply chains, the scalable nature of geolocation data brings a comparable scale to an organization’s analysis of human and asset activity. 

“Investors have typically hired specialists or consultants to do market research on the ground,” Kevin said. “That’s going away quite rapidly. New types of sensors are coming online that allow investors to go deeper into the economic activity of areas they are interested in around the world. It's a new dimension in the marketplace that has been due for decades.”

Get the Report | Quantifying the Consumer Balance Sheet

Future Opportunities for Nowcasting: ESG and Sustainable Business Practices 

Sustainable investment is a big area of growth in the financial industry, with many believing it will be a cornerstone of portfolio management in the future. Nowcasting with geospatial intelligence data has the potential to unlock capital investments that are currently blocked by a lack of visibility into ethical sourcing and business practices. 

“A major area to explore in terms of ethical sourcing is using traceability data,” said Michael. “You can really understand how things move from Point A to Point B in supply chains, or know which countries goods are actually being sourced from. This is really meaningful from the perspective of an ESG sustainability fund —not many platforms give you that visibility. There will be a lot of opportunities for geospatial intelligence in this space.” 

Kevin added to that, “We know that ESG is a big issue in consumer markets, not only for corporations and suppliers, but for investors. If you can't get a read on how a company is performing from an ESG standpoint, that’s a blocker—committees aren’t going to green light an investment in those businesses. Large institutional investors are coming to us at Orbital Insight with this issue and looking for solutions. To invest in the right companies that are working to protect the environment, you need proper tools and capabilities to answer these emerging questions about sourcing and traceability. And we're quite excited to help lead those efforts.”

Lead From Conviction Based on Data 

The webinar concluded with Michael and Kevin summing up the value of geospatial intelligence and the ability to nowcast. They reiterated that it’s not only getting a jump on what’s happening in real time for market issues that have previously been enigmatic (and putting quantifiable numbers behind it), but also developing unique metrics instead of waiting for government or corporate data to be released. By developing custom KPIs and metrics that are meaningful to a specific market or business, you’ll have data that increases conviction levels and the ability to lead your organization forward with confidence.

RBC’s strategy has been so successful that Michael is being approached by other organizations to learn how to use capabilities like Site Intelligence to solve problems. Both Michael and Kevin commented that they want to extend this knowledge to others to help spur the revolution of research. 

Michael commented, “It's really tough to go back to doing your day job without data like this; it seems archaic. [Geospatial intelligence] is a complete force multiplier for us and has completely disrupted my workflow in the best of ways. This is how we’re going to accelerate into the future from a data analysis perspective. Orbital Insight’s platforms are massively scalable and user friendly, so there’s a large appetite to understand more of what this research can do. So, thank you to Kevin for the partnership and helping us change how we think about the world.” 

Kevin replied by saying, “We’re always trying to provide better insight and visibility into economic activity, or other other types of activity as well—geospatial intelligence is multi-sector, unconfined to any particular geography. And what you're seeing with the RBC team is groundbreaking. These are new factors and insights that can come into the research process to help investors build or recalibrate their portfolios, lowering some of the unease and risk. 

“And that’s the future and beauty of geospatial intelligence—it opens up the entire planet to new insights, in a compressed time. There are some very exciting days ahead.” 

To hear everything Michael and Kevin had to say, watch the full webinar.