The world’s most valuable resource is no longer oil, but data. Since ‘The Economist’ published this ground-breaking truth in 2017, “Data, as the new oil,” has become a common refrain in business circles. But far from becoming a cliché, the weight of this statement is so heavy and profound that companies are taking heed.
With AI and ML making forays into several industries, we are coming to terms with making decisions based on petabytes of data.
Single-handedly, the data revolution has revamped the way in which most businesses today operate. It forms the backbone for customer-led innovation, business policies and practices, and even new product and service offerings.
For instance, companies like Amazon and Netflix that utilise customer data to provide customised user experiences have proven to be unstoppable.
In the financial services industry too, data plays a pivotal role in initiating positive changes across the board. Over the past few years, we’ve welcomed the emergence of challenger banks and mobile payment solutions that rely heavily on data.
Most notably, the far-encompassing definition of fintech, as a term that refers to the innovation that aims to improve and automate the delivery and use of traditional financial services, is now an everyday term that even the layperson can relate to.
Clearly, in this data-inundated marketplace, an organization’s winning edge will depend largely on how it is able to control its data. However, data supremacy is only one side of the coin. Equally important is its oft-overlooked flip side.
Consumer trust, the flip side of data overload
A recent study by the World Economic Forum and the University of Cambridge found that “trust and user adoption” of the latest technologies, such as AI, seemed to be the topmost hurdle faced by the financial industry today. Though technological improvements are indeed viewed positively, trust and buy-in from current and future customers will emerge as a key differentiator in the days to come.
Forbes noted that consumer trust directly impacts the bottom line.
Also read: Building trust in Machine Learning and AI in digital lending
Apparently, the average consumer today not only wants but demands to know all about a company before opening his/her wallet. More than 73 per cent consider transparency more important than price and 40 per cent say they will switch from their preferred brand to another that offers more transparency.
Clearly, the compulsion to base decisions on data runs both ways!
The cost of poorly handled data
In 2018, 500 million personal records were stolen. According to the RiskBased Data Breach QuickView Report at the end of September 2019, there were 5,183 breaches exposing 7.9 billion records. Compared to the 2018 report for the same period, the total number of breaches was up 33.3 per cent and the total number of records exposed more than doubled, up 112 per cent.
Another report from Norton reveals that there were 3,800 publicly disclosed breaches and 4.1 billion records exposed in the first half of 2019 alone.
All these data breaches affect companies in myriads of direct and indirect ways that we may not have completely fathomed as yet. Short-term direct losses—a drop in share price, revenue loss, and increased crisis management budget—are inevitable. In the ASEAN region, the average organizational cost of a data breach stands at about $3.6 million.
However, the indirect cost, often overlooked, is even more noxious—loss of reputation and customer trust. Data stewardship and protection or its lack thereof can directly impact your enterprise’s reputation, customer trust and overall business health for years to come.
Why data supremacy and trust must go hand-in-hand
How do these findings translate into the operational activities of a fintech? The Global FinTech Adoption Index 2019: notes that the ‘trust gap’ can create opportunities for both incumbent financial institutions and FinTech challengers.
“Even though non-financial services companies have led the way in deploying new technologies to deliver innovative services and have raised the bar on consumer expectations, they do not yet have the full confidence of consumers when it comes to providing financial services on their own.”
Fintech players must ensure that their offerings take heed of both the financial institutions’ need for data and the customers’ concerns for privacy. In May 2018, an EU regulation around data protection and privacy—the General Data Protection Regulation (GDPR)—came into effect.
Japan’s Act on the Protection of Personal Information and California’s Consumer Privacy Act also steps in the right direction. All these regulations ensure that data regulators protect personal data and establish data privacy standards for their businesses across the globe.
Above all, it puts the power back into the hands of the consumer—ensuring they have the right to demand how their personal data is being used and requesting companies to delete it if required.
Though the Fintech industry is well-equipped with technologies, communicating this message to customers and winning their trust will need to be prioritised.
If businesses can showcase their ongoing effort to keep stakeholders constantly updated, we can reduce indirect costs and more importantly, build a community of trust that will propel the industry to greater heights.
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