Why are banks unable to make much out of their data archives?

Blog by Glorious Insight

Why are banks unable to make much out of their data archives?

Gold Standards have been defining global currencies all this while but it wouldn’t be long until data takes its place. Once it sounded a utopian fascination, but lately it has turned into a reality as more and more corporates & government have started harnessing their data as fuel for economic growth. Whether it is to swing the electoral roulette, as unearthed by the Cambridge Analytica case of US Elections, or to topple an empire, courtesy to the Iraq coup via WMD allegations, data evolved from being influential & expansionary to a game-changing proposition.

But when you speak about data’s implications & influences to regulate consumer-behavior, there ain’t anyone better than banks to leave an impression.

Banks could possibly know you better than all of your social media accounts combined. These institutions have more personalized data sets stored in their silos, data lakes about you than any other service provider on the planet. They analyze your buying behaviour through online e-Commerce purchases, investment portfolios, and even the honeymoon destinations you have clicked. But the most striking question is are they using the data they have mined/extracted from customers in a true sense for growth and evolution? Well, it is an obvious no categorically. Banks have your most personalized data yet those are just lying idle in their data warehouses.

Why are Banks Not Using the Data Stored In their Archives?

What’s the basic purpose of using banking data analytics? The answer would be to influence decision making. That’s what the data culture says as per the prevailing paradigm. But would you bat an eye if social media platforms like Facebook, Instagram, or Twitter share some of your personal data like you are planning for a honeymoon? Well, you wouldn’t mind that

But what if banks straightway share with travel planners and event organizers data like this, Mr. Alex, residing in 5th Avenue, in Madison Square Garden, New York, has taken a $20,000 loan to fund their honeymoon plans. That would be a gross infringement on the right to privacy and it could nearly cost €20 million in fines and catastrophic data breach guidelines as per prevailing GDPR laws. That’s the new normal in Europe for financial institutions when they breach data guidelines. So, could you say that GDPR or General Data Protection Regulation is a curse for the banking/ financial sector?

Well, that wouldn’t be true because you use the same knife to kill a person or to cut the fruit, in both ways, it is not the knife that is dangerous but the purpose of the person holding it. That’s what GDPR is for the world. It wasn’t created to stifle innovation but innovations shouldn’t be at the cost of privacy. And when you speak about the banking sector, it is hugely driven by emotions and sentiments. If you compromise on these ethics, it could topple the entire financial system overnight.

What Banks Can Achieve To Use Data Without Regulation?

Banks could make your finances personal. There’s not a doubt on that considering they are sitting on a treasure trove of data. They have the leverage to use the data and offer deep insights to partner organizations to help achieve actionable claims. A lot has been spoken about “Experience Economy” these days and banks are at the forefront to use it to their true potential using consumer data. As per the report, almost 46% of the financial services organizations are not truly using the data to their leverage, the reason being regulations as per GDPR compliances.

Banks have significant data uptake which they can easily use to understand the customer’s lifestyles and partner with organizations that can earn lucrative dividends from such data sharing. For example, they can share data of their customers who have had recently turned into a father or mother with educational institutions. Or, they can share data of their customers recently planning to move to a new location with real estate sectors to help them sell. These are key cases where banks could have further amplified the data for cross-enterprise or sector operations and profit maximization.

Retail Banking Analytics Simplifying Data Sharing Vis-a-Viz

Banks can usher in the age of data by unraveling data stored in data lakes in a phased and regulated manner. That would be easier said than done until and unless banking analytics comes in the picture. Banking analytics will help filter, optimize, and present data that doesn’t infringe upon private space yet fulfill the objective of the industries who are partnering with banks. Banks can build a robust framework comprising contributors, subscribers, and stewards. The role of stewards would be to specifically prescribe guidelines or a shared framework in which the bank customers are in compliance with bank data sharing standards without any chargebacks or austerity measures slapped on banks. Banks will have the opportunity to maximize the use of data stored in their achieves by setting up surveillance, monitoring and assessment module where;

Accessibility Will Be Auditable

Meaning, whosoever is partnering with the banks must define their purpose to use the data. A data management system will be in place to track anomalies and track non-compliances to mitigate fines and other penal charges slapped on banks for data sharing.

Accessibility Will Be Filtered

Banking data analytics can set-up automation to ease the business process. In this model, banks will have the provision to set-up a filter mechanism for the stakeholders to restrict data access and authorize only legitimate players to use their archives. To fortify this phase in the data sharing, banks must deploy risk typologies based on core data analysis.

Process of Data Accessibility

Banks can set-up a matrix to allow its stakeholders to participate in data sharing via secure pathways. These pathways will be governed by analytics that can track, trace, and eliminate anomalies or possible attacks while accessing data from the network or sending it to the network.

Homomorphic Encryption

The process in which the records will be self-destroyed for unauthorized access. They have the leverage to use Blockchain Technology for the purpose where the consensus mechanisms will help safeguard the data records. By using blockchain technology, banks can set-up guidelines and parameters in compliance with GDPR rules to protect the customer’s personal data sharing and protect them from infringement in their private space.

Critical Data Encryption

Critical data encryption will allow the banks to exhaust their data archives instead of letting them rot in data lakes. A specific encryption mechanism can eliminate the participation of stakeholders or sectors who wish to access highly sensitive data elements.

DLT Technology

Granular monitoring methods where data access monitoring regulation happens based on the sensitivity will further ease data sharing by banks. Distributed Ledger Technology uses specific codes, algorithms, and consensus for authentication that are time-stamped and protected by mining codes. When participants who wish to avail of data available in archives are monitored through an existing system that will be regulated by blockchain technology, better accountability will be enforced.

Conclusion

It is necessary for the banks to put the preference of the customers as their first priority. In most cases, banks have known customer’s spending habits by their trend analysis and screening patterns. Banks very well understand that the core business operations across the world revolve around technology, but fascinating the process with technology minus accountability will lead to harsh outcomes. Data management in banking has come with a responsibility and the relationship with customers is built on emotions/sentiments. Any compromise on the same can completely corrupt the banking process and put the banking system behind bars. As a market veteran in Big Data, AI & Analytics, Glorious Insight is working towards setting up a smart technical environment where banks can harness the true potential of their data without compromising on the terms & conditions of the GDPR compliances.