When I started working in FinTech, the first question I had was: "Do banks seriously give us all that data to analyze?" To be honest, I was mainly concerned about my own privacy instead of dreaming about the benefits I could get by giving some of my information to third parties.
Here in Europe, we are pretty used to tight regulations when it comes to privacy, especially when dealing with extremely sensitive information like banking transactions. While most of us don’t mind sharing personal photos on social networks, we are much more cautious when it comes to disclosing financial information, especially with a startup and not an established institution like a traditional bank.
Traditional banks work under a complex system of laws and institutions that scrutinize them closely and constantly. These entities had decades to evolve and adapt, gradually building a solid base of public trust in the process. Recently, however, we have seen the rise of a new kind of financial company that doesn’t work under the same boundaries and pressures.
On one hand, this has been a positive development: innovative startups are typically much quicker at identifying new opportunities that came from the boom of Big Data and open APIs than governments and traditional banks.
At the same time, certain already well-known FinTech innovations, such as bitcoin or crowdfunding, are struggling with heavy and outdated regulatory and technical environments that were built for the antiquated institution that is the traditional bank.
This 3-part blog series will explore how regulation can both help and hinder FinTech innovation, and vice-versa.
Here's a quick breakdown/sneak preview of what I'll cover:
PART 1 - LEGISLATION & REGULATION
What kind of regulatory environment is needed specifically for FinTech, and what could it look like? Understanding the current regulatory situation lends a clearer perspective not only to encourage consumer trust in FinTech, but also when it comes to influencing the direction policymakers take and what can be expected from the rise of FinTech in the coming years.
PART 2 - TECHNOLOGY
How do banks keep their data secure? Are the threats outpacing their ability to meet them? And how do FinTech companies obtain the data they need for their solutions to work? In this part I'll look at what kind of solutions are out there to keep your data safe and make it useful at the same time.
PART 3 - BENEFITS
Access to sensitive data has its risks, but technology and legislation are both evolving to deal with it in a secure way. The benefits that can be obtained from FinTech are huge, and if the regulations and technologies behind this emerging field are able to ensure the necessary levels of security and trust, we may be on the cusp of a true revolution in the financial industry, which may set a precedent for change in other traditional sectors.
Finding a balanced tradeoff between the privacy we need and the benefits we could get from FinTech innovations is not a simple task, but that’s why individuals and organizations from all kinds of industries (finance, law, tech, etc) are coming together to create legislative and technological frameworks that are both secure enough for the end user, and accessible/flexible enough to promote innovation.
Watch this space for Part 1 of the Banks & Sensitive Data series!