Big data has long been big business, and recent developments show how it can help to save costs as well as target customers. But as recent cybersecurity scares have shown, there are still questions to answer regarding the transferring of this information.

Data is hot stuff. For a while now the opportunities for using big data to target customer groups with deals and as a source of revenue in itself have been much touted. But the latest deals have been more concerned with cutting costs by using data more effectively in processing. 

Goldman Sachs, JPMorgan and Morgan Stanley have just announced a tie up with tech company SmartStream to create a reference data utility. The aim is to share costs by working together – an idea that would have been unthinkable before the financial crash – to produce clean data in securities trades that will cut down on broken trades and assist with regulatory reporting and risk management. 

“The new reference data utility is at the forefront of what is really an evolution in the industry with the achievement of processing mutualisation, the reduction in operational risk and an increase in service quality within the reference data management domain,” says Philippe Chambadal, CEO of SmartStream. 

The opportunity exists to take tens of billions of dollars in costs out of the post-trade environment. Another initiative, which came about last year, was that of six big banks and the Depository Trust & Clearing Corp to work together on the data needed for complying with ‘know your customer’ rules. 

But as well as being hot, certain kinds of data are also sensitive. There are concerns about handing it to a third party because of cybersecurity fears. There are also privacy issues, as illustrated by the European Court of Justice’s recent ruling against the free flow of data across the Atlantic under the so-called Safe Harbour clause. This affects more than 4000 companies that now have just three months to find alternatives. 

While much of the press coverage about Safe Harbour concerned the consumer internet giants such as Facebook and Amazon, the ruling also impacts companies providing cloud services for business. Failure to work out ways in which data can be transferred without breaching data privacy will inhibit the data services revolution. In a globalised world, the idea that all data must be handled locally – as is implied by the European Court of Justice’s decision – seems to belong in the Stone Age. Surely there are better solutions available. 

Brian Caplen is the editor of The Banker.

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