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Finance

WHILE DATA IS 21ST CENTURY GOLD, MINING CAN BE DANGEROUS

by Peter Matthews of nucleus

 

This week the French data regulator, CNIL, fined Google €50m for not obtaining a valid legal basis for processing user data. Now we know GDPR has teeth, so how should marketers balance their addiction to personalisation with compliance to the new regulations?

 

“Lack of transparency, inadequate information and lack of valid consent regarding ads personalisation” were CNIL’s reasons for levying the record fine, laying out a clear warning to others for subsuming specific customer consents required by GDPR in long scrolling pages of terms and conditions.

 

Here is the marketer’s dilemma positioned in a banking context. Retail banks have masses of data about all of us, especially our spending habits and financial health, but have been useless at using it for our benefit to improve user experiences, or even to help them understand their customers better.

 

Instead they have relied on credit rating agencies who, on the other hand, have compiled unflattering profiles of each of us that may actually penalise us for a single misdemeanour for up to six years.

 

Do you remember ever giving them consent? I wonder whether the regulators will now ask where they asked for our consent? Google isn’t alone, banks and credit card companies are also good at hiding their terms in pages of ts&cs.

 

If you have ever transgressed, don’t think your spotless record with your bank will help, because your third party credit score will define whether you are ‘prime’, ‘near-prime’ or ‘sub-prime’. If either of the latter, they probably won’t lend to you and you’ll be forced into the hands of a high interest sub-prime lender.

 

Fintechs and challenger banks have spotted the opportunity to use streamlined digital platforms to leverage data to segment the market in more meaningful ways and also, across the board, to improve customer experience. The big banks need to catch up and learn to use their data, responsibly.

 

So, with national regulators now dishing out substantial fines, how should brands use personal data to improve their offers and personalise brand experiences, while also meeting the consent requirements of GDPR and other obligations?

 

The answer has to be a personal contract with customers that rewards specific consent to use personal data with useful and valued personalisation. Back in the context of a bank, timely predictive advice when your account balance isn’t going to meet your month-end obligations, suggestions about rebuilding your credit score, or prompting a savings account that would earn you interest on current account balances are all things that would bring value and strengthen brand loyalty. These days, robo advisers can even help with managing investment portfolios.

 

With so much personal data already held by big brands and regulators beginning to flex their muscles when consent is taken for granted, brand marketers need to balance the golden allure of big data with its risks, and recognise the need for transparency, security and trust. Only when they do will we see personalisation valued by both brands and customers.

 

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Finance

FIXING THE FLAWS IN FINANCIAL SERVICES’ DATA MANAGEMENT

Simon Cole, CEO at Automated Intelligence, a cloud-based data compliance and governance solutions provider to the financial services sector, warns FS firms must address the data issues flagged and created by the Covid-19 pandemic

When the pandemic started, organisations within the financial services sector were faced with three key questions. How do we do homeworking?  How do we go remote?  How do we manage this?

In trying to answer these questions, the business continuity measures taken by FS firms were not up to scratch. Mistakes that could have been avoided were made. To start off with, users had to be given the necessary equipment to make remote working happen and they had to have access to the infrastructure needed, such as broadband. Users also had to have access to the information and data needed to do their job. And this is where they started to run into trouble. While software applications like Zoom and Microsoft Teams made it possible to stay connected, the systems in place were not adequate to facilitate secure data management practices en masse.

These are the downsides that need to be addressed.

 

Where’s the governance?

Historically, firms operating in the financial sector have been slow to adopt cloud technology, preferring to store sensitive data on premise, in order to mitigate perceived risk. As such, through the lockdown, much of the data people need access to is not in the cloud, but is stored in applications or file servers.

Adding to the issue, the VPNs of many organisations don’t have the capacity to allow large numbers of users online. This lack of VPN availability has forced FS firms to allow users access to GDPR sensitive data multiple times, with little or no method of tracking in place.

In order to acquire the information they need to do their jobs while out of the office, employees have been copying, downloading and sharing files that now exist outside of the corporate firewall, without any governance or security considerations. Such data is now, for all intents and purposes, in the wild, making it harder to bring back under control. Teams working remotely don’t have the corporate governance and security protocols that they would have when working in the office.

So, being forced to work remotely, at short notice, has impacted compliance and governance in a very negative manner. The way data is being handled greatly increases the chance of a data breach occurring. It also flies in the face of FCA regulation, and in particular GDPR where personal data is being used. While the FCA might be a little more lax in light of the current challenges right now, this will change when data breaches start to occur and customers start asking questions. Poor choices now will not be a reasonable excuse to avoid future fines.

If this crisis has shown us one important thing, it’s that the slowness of financial services firms in adopting cloud technology, which made it significantly harder for them to access and use data, has hurt business continuity, security and privacy.

 

Better Data Practices

So, how can organisations take control of their data? For many this means deploying it to the cloud in a rapid manner, whilst retaining security and governance practices. It is possible for organisations to make data accessible if the technology is deployed correctly, allowing all the necessary controls to remain in place. Having the short-term decisions correctly in place and making them under an umbrella of good governance and accountability, ensures that you don’t suffer knee jerk reactions and risk losing control of data.

By keeping on top of your data as much as possible, you significantly reduce the opportunity for chaos to happen. That starts with making it available on a safe and secure platform. At a time like this, it is imperative that organisations have a good understanding of their data. Information asset registers should be kept up to date to track where their information is, where it’s being used and the purpose for which it’s being used.

For our clients, we are now using AI to help them assess and understand their data, flag any risks their data is posing to their organisation, and help them mitigate that risk. By implementing the right systems this can all be automated, and there is nothing stopping organisations from doing this with next to zero impact on their userbase.

Remote working is becoming the norm: It has been proven to work and organisations will start reflecting on how much office space and connectivity they really need. As such, organisations are being forced to act now and adapt their data governance and compliance practices to suit the ‘new normal’. Waiting until the pandemic passes is not an option.

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Finance

5 WAYS TO MAXIMISE THE VALUE OF INSTANT PAYMENTS

Lauren Jones, International Payments Ambassador, Icon Solutions

 

Instant payments are the ‘new normal’. The last decade saw a ramp-up in adoption as regulation, customer expectation and technology dovetailed to create immediate, 24/7 demand for financial services.

This means that banks and payment service providers (PSPs) who rely solely on speed of payments as a competitive differentiator will struggle to get ahead. The focus is now on leveraging instant payments rails to deliver value-added services that can drive a return on investment. Understanding where these opportunities lie, therefore, is crucial.

  1. Request to Pay for more control

Lauren Jones

Perhaps the most valuable new way to leverage instant payment rails is Request to Pay (R2P). R2P is an umbrella term for various scenarios in which a payee takes the initiative to request a specific payment from the payer.

Corporates have two key challenges in that they only receive funds when a customer wants to pay them, and they only receive the information the customer chooses to provide. This makes reconciliation difficult and can even negatively impact workflow and working capital.

However, the R2P options for bill presentment and payments solve these problems, significantly reducing operational cost, liability for chargebacks and fraud risk, as well as improving reconciliation and liquidity. A secure R2P service also has the potential to simplify managing receivables and reduce processing costs.

R2P also benefits consumers. As they are presented with a payment request rather than funds being debited automatically, they can enjoy more autonomy and control over their money across various channels.

As a result, several solutions have emerged under the R2P banner, such as the IDEAL scheme in The Netherlands and PromptPay in Thailand. Further traction will be gained, with EBA Clearing gearing up to launch a pan-European R2P solution in 2020. Certain banks in the US have also begun to go live with The Clearing House ISO 20022 R2P messages using instant payments infrastructure.

  1. Amplify the power of QR codes

QR code solutions have surged in popularity in recent years as a simple, low-cost alternative payment method, offering consumers and merchants more choice at checkout.

We are now seeing various banks and payments industry players reviewing their strategies to take full advantage. QR code-based solutions, combined with instant payments rails, can extend utility beyond the physical point-of-sale to include online and bill payments.

Thailand, India, China, Singapore, Malaysia and Hong Kong have all established payment services that leverage QR codes to initiate real-time payments. And although Europe and the US have been slower to adopt QR codes,  some European countries such as Sweden and Switzerland have already embraced the technology with country-wide schemes for both retail and corporate payments. In the US, adoption is market-led with several retailers such as Target and Walmart implementing proprietary QR code payment systems.

  1. Leverage valuable real-time data with ISO 20022

While instant payments does not inherently provide enhanced data opportunities, most of today’s instant payments systems are built using the ISO 20022 data standard. This is due to the extended data-carrying capabilities and the added value this messaging standard can offer banks’ customers. For data to be truly valuable, it needs to be machine-readable, consistently structured and standardised – ISO 20022 enables all that.

However merely collecting data is not enough. Mining and extracting value from this data will be a decisive differentiating factor for banks and other players looking to take their customer propositions to the next level.

The good news is that banks and PSPs are well-positioned to collate and leverage data to deliver tailored interactions, unlocking new revenue opportunities while remaining compliant to stringent regulation.

  1. Deliver convenience for corporates

The combination of instant and enhanced data-carrying capabilities is extremely attractive to large corporates, and in turn, greater corporate usage of an instant payment system will increase volumes and lower costs.

Instant payments give corporate treasurers greater control over their payments, allowing them to make on-the-spot payment decisions and hold on to liquidity for longer. Instant payments enable informed and timely views on cash positions, enabling management of treasury risk. ISO 20022 data- carrying capabilities also allow corporates to attach invoice data to a payment, allowing for more efficient reconciliation.

Benefits are not only limited to corporate treasurers, but also B2C treasury departments. Instant payments offer new ways to make payments to customers. As mentioned, R2P can also lower cost, reduce risk of fraud, and increase information around each transaction, all of which are key requirements for modern treasury departments.

Moreover, as domestic instant payments schemes grow, there is an opportunity to line these systems together to deliver cross-border real-time movement of both funds and data for corporate and commercial transactions.

  1. Embrace new channels

As payments become increasingly embedded in our daily lives and interactions, it is inevitable that instant payments will become more ingrained in the social media experience.

This is already the case across many Asian countries, but momentum is slowly building in Europe and the US as well. For example, First Direct’s Fdpay service allows customers to make P2P payments within social media apps. In addition, Instagram, WhatsApp and Facebook are all actively exploring instant payments and checkout options. Watch this space.

 

Building on strong foundations

It is clear that building a foundation for innovation now will enable banks to create points of differentiation and tap into new revenue streams through R2P, QR codes, leveraging enhanced data, corporate instant payments and new channels.

But to fully realise the return on investment, banks will need to overcome the legacy payment environments many are encumbered with, and will need to develop a powerful transformation strategy to ensure their payments landscape is equipped to fully harness the benefits.

 

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