Over the past few years we've seen tumult in the traditional financial services industry and the rise of a host of new internet finance players that are taking advantage of direct relationships with consumers, mobile and social applications and advances in artificial intelligence and machine learning technologies. However the elephant in the room is privacy - with such large amounts of sensitive personal data at the hear of these systems what role does privacy have to play in the relatively new field of internet finance? (November 2016)
Traditional Finance Industry and Big Data Concepts
Traditional financial institutions have commission and arbitrage based business models. Competitive advantage relies on lowering costs and improving return based on risk and return calculations. In these models, although financial data is key, customer data is a regarded as a by-product and not fully leveraged.
Big Data Concepts and the Traditional Finance Industry
At the time of writing we see traditional finance organizations are using customer data to improve the effectiveness of outdated business processes. Credit risk calculations can be improved by purchasing additional data from the credit reporting agencies or direct mail performance can be improved with additional profile data.
Traditional Finance Industry and Privacy Ideology
A consequence of doing business means that personal data on customers (facts, profiles and transactions) is collected and retained. Privacy represents risk and therefore represents a containment cost to the business that must be budgeted.
Privacy Ideology and the Traditional Finance Industry
Today there are 3rd parties like the credit reporting agencies that have made a business out of broken authentication models (e.g. identity theft products). Other than that, privacy is not a fundamental pillar of the finance industry product portfolio.
Internet Finance Companies and Big Data Concepts
In this new breed of company, data is the product and the key entity in the data model is the customer. If leveraged correctly personal financial health is the benefit. In this new world innovation is easily applied to niches such as environmentally friendly, social conscience, community P2P insights. The organizations base success on innovative ways to increase organic data acquisition.
Big Data Concepts and Internet Finance Companies
As increased data allows better business performance, these new organizations are building relationships and mechanisms to harvest data from external sources as a priority to enrich current data assets.
Internet Finance Companies and Privacy Ideologies
Privacy is a spectrum, going from complete transparency to full obscurity. The benefits and risks associated with privacy are only just being evaluated and discussed. With data at the heart of these new financial services value propositions, privacy needs to be baked into the very heart of the business model and the customer offering.
Privacy Ideologies and Internet Finance Companies
A new generation of consumers have begun to navigate this new data rich world where their every move is being explicitly tracked and their future behaviors are implicitly predicted, Financial organizations will need to create new norms for data sharing and privacy that are part of the new business model and marketing efforts will shape societal norms as to how these are viewed and adopted.