Market Regulation and Opportunity

Regulation is a fact of life in financial services. Banking and financial institutions face it across multiple layers but few manage to turn it into an opportunity. They now risk losing out.

Here we look at why this happens by reviewing two of the more relevant pieces of legislation across the banking and finance marketplace.

GDPR – the General Data Protection Regulation commences in May 2018. The EEA wide regulation covers personal data as well as the processing of that data. Firms are updating processes to manage client data and ensure its being captured and made available if requested. Data protection officers (DPO’s) will need to be appointed to formalise processes and provide responsibility.  Institutions need to be compliant and that becomes their focus and priority.

Fintech’s or non-bank financials however are already making hay by focusing on growth areas such as cyber risk and data science and analytics.  Their belief is that understanding data and focusing on consumer and behavioural trends will pave the way to successfully commercialise the opportunity.

PSD2 – the second instalment of the payment services directive is set for Jan 2018. Whilst further clarity is still needed banks have been preparing and I’m sure will be compliant (to the minimum level at least), that’s what I have heard in recent discussions with the banks.

Fintech companies have been active in this space since the first directive 10 years ago, particularly in the area of money and payments. Many have developed APIs and are building new client channels and revenue streams. Some entities will become TPPs. The value of data is once again imperative and its consumer behaviour that drive the open banking platforms of the future. Fintech’s are ideally positioned to capture this.

Regulated entities must be compliant, they have no option but they can still turn the regulation into an opportunity by focusing upon the following:

  • Understanding the key drivers around client decisions
  • Partnering with new innovative companies in the areas of data science and analytics  
  • View client behaviour as a pathway to future success

 

Stephen Sheehan is a graduate of MIT Future Commerce and Fintech and is an international banking specialist assisting Fintech companies through his company www.digitalstate.ie

 

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