By : Andrew Short
November 20, 2017 05:00 AM
Increased data-sharing will be a defining trend of the financial services industry over the coming years.
Initiatives such as the forthcoming PSD2 legislation in the EU and ‘open banking’ drives in markets like the UK and Australia are placing a big emphasis on enabling competition through wider sharing of data.
Financial institutions will also be affected by the EU’s General Data Protection Regulation (GDPR) when it is implemented in May 2018. These new rules will place a number of new requirements on businesses in terms of how they collect, store and use personal data.
We have already seen some examples of banks making it easier for customers to share their information with third parties, and this is something that will become more common in the near future.
Bank of America has been working with financial data aggregators to provide the option for customers to securely share their account data with third-party money management apps.
The process will work by consumers logging into the data aggregation service they use and adding or verifying their Bank of America account, after which they will have to confirm consent for their financial data to be shared. An application programming interface (API) will enable the data-sharing, with a unique token being used to remove usernames and passwords from circulation.
Bank of America piloted this system with two data aggregators.
Michelle Moore, head of digital banking at the Charlotte-based institution, said these efforts are indicative of the growing importance of customer choice, transparency and simple but secure access to consumer data in the retail banking industry.
Aditya Bhasin, head of consumer and wealth management technology at Bank of America, added: “As one of the first banks to pilot with financial aggregators, this is a positive step toward enhancing safe and secure access for customers to their data. This is a key part of our API strategy, and will allow us to continue serving our customers in an expanding financial ecosystem.”
Changes in industry models and regulations – particularly PSD2 – will see data-sharing becoming more prevalent and playing a key role in driving competition in the financial services industry.
But amidst all this exciting and potentially revolutionary change, established financial institutions, challenger banks and fintechs need to play close attention to consumer attitudes towards how their data is used.
Payments sector body Payments UK conducted research which found that eight out of ten people in Britain consider their current account balance completely private. More than two-thirds felt the same about their direct debits (69 percent) and their spending habits (67 percent).
There seems to be a recognition that sharing personal data is an increasingly common and necessary part of modern life, with 68 percent of respondents agreeing with this idea. However, the research also suggested that many consumers are still cautious about how their data – particularly their sensitive financial information – is shared.
Payments UK noted: “In order to fully realize the potential of data-sharing, a lot more work has to be done to bring customers along on this journey.”
With GDPR on the horizon in the EU – bringing new requirements including consumer rights ‘to be forgotten’ and to request all data held about them – there is certainly a lot for financial services providers to consider as far as customer data is concerned.
However, organizations that are prepared for these changes and ready to take full advantage of them could be about to enter an exciting new era for the business and its customers.