Banks are being challenged on multiple fronts. Low interest rates and increasing regulatory burdens are impacting profit. Challenger banks, with more agile business models, unfettered by legacy systems and past brand issues are offering new innovative products. Whilst fintechs, targeting specific profitable services such as payments or international transfers are disintermediating banks’ traditional sources of additional revenue.
It isn’t all bad news for the traditional retail banks though. As analytics and AI systems continue to shape the future of financial services, personal data is fast becoming a highly valuable asset.
Traditional banks have significantly more (although often untapped) customer data, along with a much higher level of consumer trust, for protecting that data. According to an IBM survey, 70% of respondents indicated that they trust traditional banks more than non-bank competitors.
But a recent Capgemini report highlighted a clear gap between customers’ perception of how safe the personal data held by banks and insurers is, and how safe experts believe it to be. The report states that 25% of institutions have been victims of hacks, yet only 3% of consumers think their bank has been hacked. Perhaps more significantly, 74% of customers would change their bank or insurer if they became aware of a data breach, yet only 21% of organisations are highly confident they could detect that a breach had occurred.
This research shows that traditional banks currently still have customers’ trust – a significant advantage at a time when banks need to innovate and find new sources of revenue.
However, the suggestion that public perception of banks may not reflect their actual ability to protect customer data, could be a boon for fintechs and challenger banks. A change in public opinion would reduce a major obstacle for them and potentially drive large scale customer migration. Particularly with open banking making it much easier for customers to move their personal data from one bank to another.
Whether to protect existing revenue streams or to create new ones, the message for banks is clear: sustain a good reputation for data protection by leading the field in data privacy. By protecting against data breaches and the misuse of data, sensitive data can be opened up, safely, to build new, innovative revenue streams, gain greater insight, and maintain that all important competitive edge.
Privitar believes privacy engineering techniques can be used as way of enforcing enterprise privacy policies. These policies provide transparency and accountability, and enforcing them using technological controls reduces risk further. This can accelerate advanced data analytics pipelines by reducing the friction associated with working with sensitive or confidential data sets.