Spending by money managers on mobile device location data is expected to grow 40% annually, to a total of $250 million by 2020, according to a report by capital markets consultant Opimas.
The spending will include data sources, predictive analytics, infrastructure and related data management, according to the report, "Generating Alpha with Mobile Device Geolocation Data."
The report estimates that location-based data — the anonymous tracking of smartphones based on global positioning satellites and cell towers — could generate up to three times the return for managers as the data cost, with further alpha possible as the quality of the data increases and money managers learn how to use it better.
The growth in data location use will be spurred by increased international coverage, particularly in Asia; the introduction of 5G technology that will improve smartphone connections and speeds; and better quality of data as the location-data industry moves on from one "that is still seeing teething pains," the report said.
Some data quality issues include separating foot traffic information from location data obtained from adjacent automotive and public transit traffic, and the multiple counting of a single smartphone with more than one app actively using global positioning satellite tracking.
"Greater experience with correcting these issues and better normalization of data will lead to marked improvement in applicability of mobile data to asset management," the report said. "As a result, we expect that this is a sector that will grow quickly in coming years, and eventually mobile geolocation data will become an indispensable tool in asset management."