Customers trust banks with their money, but should they trust banks with their data?
Banks are in a data dilemma. On the one hand the regulators want them to hold extensive data on clients and keep it forever as part of the drive against money laundering. On the other hand data protection laws require banks to get customers’ consent to collect and store their data.
A third challenge is that banking commentators, including The Banker, are often arguing that data is the way forward for banks. Having more of it, and using it better, is one way to enhance profits by better targeting of particular client groups for both banking products and those of third parties. In an extreme version of this approach, the bank will become the key repository of an individual’s security data and the preferred and safe medium by which they access all other websites.
How can banks keep everyone satisfied and at the same time move on to this new and prosperous business model? The key is technology. Rather than just sticking more band-aids on a legacy system, the data and identity revolution is calling for an IT system to match.
Secure data is the key. Customers trust banks with their money – or at least they did before the financial crisis. They are therefore the natural intermediary to be trusted with personal data.
As long as the trust is there, gaining consent to hold someone’s data should be easy and advantageous to all parties. Banks do better business, clients get better service (and maybe even a fee for their data), and regulators know that the process has client approval and is robust enough for them to investigate any wrongdoing.
Banks would be helped in achieving this, however, if regulators managed to join up their data protection laws with their anti-money laundering initiatives so that they operated together rather than in opposition.
