The amount of data stored on cloud these days is incomprehensible. The data stored by Amazon, Google and Microsoft in their own cloud on their own customers is massive, and includes personal bank details. If calculated, strings of it could circle the earth many times over. It’s just sitting there. In data centers. Without ample supervision.
Tech giants are under increasing scrutiny by regulators for data confidentiality. For example, within just days after GDPR came into effect, companies such as Facebook were criticized for forcing customers to agree to their privacy conditions. The company’s recent monumental stock tumble is evidence that even Wall Street is concerned. Regulation is also rampant in the banking industry – known for being arbiters of customer trust with tight data protection standards – as conversations about open banking and customer data sharing proliferate. Regulations are challenging financial organizations to adapt faster to the digital world and manage sensitive customer data better. However, they must not forget to protect the data of their customers and safeguard privacy.
How do businesses prosper with this looming threat of risk? How can banks who work with tech giants better protect customer data and thus prepare themselves for more fluidity between organizations that the fintech revolution promises?
Cloud adoption has added a new wrinkle to the trend. Banks’ regulated data, such as customer information, is now being stored and in some cases shared, in an unregulated way. Financial institutions need to choose carefully which data they collect and share, how to best store it so they can use it effectively.
Customers expect transparency, at all times
Subsequent to recent data exploitation stories, customers, more than ever, expect banks to be transparent in their use of personal data. As banks become digital businesses seeking to improve customer engagement and satisfaction, more data is shared between financial institutions and third parties, including social media companies.
Following the Facebook-Cambridge Analytica scandal, anxiety is growing as customers want to know whose hands their data is going into. On the other hand, the future is ironically more data-driven and banks depend on the sharing of data, including with tech giants, to build a profitable business.
Open banking opens opportunities
The concept of open banking is designed to improve innovation by collaboration, which will drive down costs for customers. According to Forrester, “open banking will transform the landscape, promoting transparency, innovation, and greater choice for customers, and it will force all banks — not just the enlightened ones — to place customers at the center of the value chain.”
While Open Banking hasn’t hit the U.S. in a big way yet, the rest of the world is making strides. New regulation is enabling banks to grow through end-to-end management, monitoring and monetization across the value chain. Opening up access to customer data through secure APIs provides an added advantage of getting to know the customer better, with more granular-level insights.
Once open banking does cross over into mainstream adoption, banks can no longer store regulated data in an unregulated way. GDPR is one way in which data kept in the cloud is regulated, but more is needed if banks want adequate control over the data they store. They need to pull out the data currently stored in silos and bring it to their platform to be shared. It’s a large volume of data too and so banks need to figure out what it says about the customer as a whole. This is where powerful analytics can play a role. The data held on bank’s large customer base is a major advantage, and it’s right at their fingertips. Banks can use this information to more effectively offer customers better products and services. Analytics can provide impressive insight and will help banks to create their own ecosystem of customer knowledge with solutions to match.
Provided banks can comply with regulations and respect customer data, they can make good use of services provided by tech giants, including cloud providers. Moreover, rather than keeping data stored in silos across the organization, by gathering it all into one place, banks can gain greater control of data and keep it confidential. Careful attention to customer data will mold banks to be customer centric. Looking into the future, customers will have a larger say, but ultimately it is up to banks to decide if they have a place in the digital era.