Views - Eurofi Magazine April 2020
Please click here for the full article.
Diana Paredes, our CEO, and Murat Abur, our CTO, are regular speakers at Eurofi.
Diana was in Helsinki, Finland to discuss “Opportunities and Data protection and fairness issues associated with AI”.
For the Eurofi magazine for this event, click here
Suade are proud to have attended and contributed an article on Data protection, fairness and sharing at the Eurofi High Level Seminar in Bucharest. Read on for an excerpt of the article.
In the age of big data lies a fruitful opportunity for the financial sector. With this opportunity comes a call to action for the industry - to confront the reality that the industry is hoarding a goldmine of data that is far from reaching its potential.
While other sectors have seen enormous benefits of utilising data, the financial sector still lags behind. Meanwhile, in just over a decade, ‘Data Giants’ such as Facebook and Google have turned data into a commodity that is surpassing the value of oil. If we consider the intelligence that an organisation such as Amazon reaps from customer insights generated by data analytics tools, and thus contemplate the potential knowledge that financial institutions could gain about their customers from financial data, we are pressed to ask ourselves why the financial industry is not doing a lot more with their data.
Perhaps what sets the Data Giants apart is the innovative and modern mindset that they maintain towards data. They also have the advantage of being incumbents in relatively new industries where there is either a zerotolerance policy towards legacy solutions, or where antiquated systems simply do not exist.
An unnerving element of this call to action, is that given the surge of the importance of data for the financial industry, combined with how accomplished these ‘Tech Giants’ have become in mastering the art of data, a threat arises that these corporations may emerge as competitors in the financial industry. This leads us to question why the financial sector has fallen so far behind, and what is it that the Tech Giants are doing that the financial industry is not?
Having access to large amounts of data is a definite strength of the financial industry. However, this advantage comes with the caveat that if this data is not refined and converted into a manageable format, then its value cannot be exploited. This is why implementing data standards is critical for the industry.
The history of poor data management for the financial industry is quite an unforgiving one. For example, if a common data format for mortgages had existed in 2007, banks could have seen growing risks in mortgage-backed securities more readily instead of just relying on top-level ratings. Unfortunately, ten years after the crisis, much of the financial data in the industry remains trapped in black box, legacy systems in either a non-existent or non-extractable format. It follows that the big data problems of financial institutions can largely be solved by releasing this data through the implementation of data standards.
The necessity of better data standards has come to light for many industry players, including the regulator. Data standards can also play an important role in addressing the various risks that arise while utilising data in conjunction with modern technologies, which both the regulator and financial institutions ought to be aware of.
Diana was in Vienna, Austria, to share her thoughts in a session on GDPR.
"A few months after the enforcement of the GDPR in the EU and while similar legislations are passed in other geographies (e.g. in June California passed a similar bill which will enter into effect in January 2020) the session is intended for assessing the challenges faced by financial institutions which result from rising data-related competition, as well as the anticipated evolutions and adaptation issues resulting from those recently adopted regulations, notably in terms of business models and evolution of financial services."
For the Eurofi magazine for this event, click here.
Murat Abur, our CTO, was invited to speak at the Eurofi High Level Seminar 2018 to share his thoughts in the Eurofi Magazine.
Murat was in Sofia, Bulgaria, to share his thoughts and discuss the impact of GDPR and PSD2 at the Eurofi High Level Seminar. The Seminar is an international event, gathering over 800 participants from the European and international public authorities and the financial industry.
Murat's piece in the Eurofi Magazine: GDPR and the opportunity for technology to put a value on personal data.
The General Data Protection Regulation (GDPR) is coming in to full swing this year and the impact it will have on technology in the financial industry is unknown at best. From a policy point of view, it brings the topic of personal data and the importance of its ownership into the decision-making process of the customer. This is the first step for financial services customers to consciously put a value on their privacy.
Personal data, in many ways, is an extension of private property for the digital age. Hence, it seems natural that individuals should have similar rights. The problem with personal data, however, is that it is very hard to value for the user, but very easy to value for the company acquiring the data.
Large technology companies like Google have made that core to their business. Consider the moment you launch a mapping application on your phone. "Would you like to share your location?" You can answer "No, thank you" and still use the rest of the features and functionality. Logging in with an email account might open further features like personalised search results. The service provider is effectively trading information for features. In fact, the service provider probably knows the exact monetary value of a user with location turned on versus one without. Contrastingly, there are ride-sharing apps that do not allow any functionalities without location sharing turned on. This is effectively asking a user to go "all-in" before seeing the flop (to use a poker reference).
The first approach appeals to a spectrum of users but requires a huge amount of analysis and segregation of services that can be delivered independently. The second, monolithic approach is more efficient, but has a binary impact on users. Both models are "successful" in that they have willing and accepting users.
Drawing parallels to the financial system, most firms, due to Know Your Customer (KYC) regulations, take the latter approach of requiring a large amount of information, after which, you are granted access to a wide range of services. This presents an opportunity for Financial Technology (FinTech) players and banks to compete on privacy. Some information required for a current account, a bit more information for an overdraft and a bit more for a mortgage.
It is not hard to imagine a world where a FinTech firm or bank might come to a user and say, "If you link three social media accounts to your card number, we will give you an extra 1% on a 6-month time deposit, after which we will delete all references to your social media accounts." This agreement seems to wrap in the GDPR principles of consent (at start) and the right to be forgotten (after 6 months). But what if the firm, through a combination of AI, machine learning and other technologies deduced 1,000 other data points about the user or the user's friends in that six month period? Does the user then also have the right to request data erasure for their friends? Will "highly connected" individuals then be targeted for their personal data? GDPR is just the beginning of that understanding.
These are difficult questions with difficult answers, but ultimately GDPR and the regulations that follow will force businesses to put a value on personal data and at least allow consumers to know when they are "all-in."
For the full section in the Eurofi magazine, click here.