Data sharing: the key to a digital banking revolution?
- by 7wData
Data-driven insights and analysis could be the key to effecting structural change in the FinTech world, but companies need to contend with increased customer demand for data security and privacy.
Over the past five years, the digital banking revolution has had a seismic impact on the relationship between customers and the institutions that handle their money. The rise of online banking – along with its accompanying wave of digital-only challenger banks – mobile payments and increasingly personalised money management tools have given birth to a FinTech industry expected to reach an estimated value of more than $305bn by 2023. The driving force behind this sweeping digital transformation is the exponential growth of big data which, when twinned with cutting-edge AI and machine learning analytics, has created actionable insights that are leading financial institutions down a road towards a customer-centric, hyper-personalised financial future.
That being said, while FinTech has enabled myriad new ways for us to buy stocks, deposit cheques and otherwise manage our money, some industry leaders think that the real revolution is still around the corner.
“I still find it pretty interesting that there’s been substantial technological change out there, but that the banking system we have is pretty similar to the one that was created by the Medici in the 13th century,” said Stephen Cecchetti, the Rosen Family Chair in International Finance at Brandeis International Business School, speaking at the FinTech and Digital Currency panel at Boston FinTech Week 2019. “It’s true that I can do things on my phone, but the things I do on my phone are not fundamentally different, they are just a little bit easier.” Cecchetti is confident that deep, structural change is coming to the sector, and that data analytics and insight gathering are going to be at the heart of the transformation.
However, in 2019, data is a sticky subject. The past decade been defined by high profile data breaches like the theft of personal information contained in some three billion accounts from Yahoo in 2016, which takes the trophy for ‘Biggest Invasion of Privacy in the History of Mankind’, and was a blunder that knocked an estimated $350mn off the company’s sale price. “The damages of these data breaches are not only reputational, but also financial. As a result of Equifax’s data breach, the organisation reached an agreement to pay at least $575mn and up to $700mn to compensate those whose personal data was exposed,” writes Simon Hill, Head of Legal & Compliance at encryption company Certes Networks. “In 2016 Tesco Bank was fined £16.4mn by the Financial Conduct Authority (FCA) over a ‘largely avoidable’ cyber-attack that saw criminals steal over £2mn from 34 accounts.” No matter the size of the breach, Hill notes, the penalties that companies can incur have the potential to be severe.
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