Confronted with legislation that is becoming increasingly constrictive, banks must optimize the management of their data. It’s a challenge that is compounded by the fact that data is often dispersed throughout information systems – a fact that aggregators are capitalising on to offer new multi-bank applications.
Banks have a role to play in detecting abnormal transactions, such as terrorism funding and money laundering, through analysis of cash movement linked to customer data. Over the past few years, and especially in the last several months, this fight has intensified and become more complex with the EU’s Revised Directive on Payment Services (PSD2). Banks are now required to provide access to transaction information of customers who wish to work with new entrants, such as French aggregators Bankin and Linxo.
Account aggregation makes it possible for customers to use a single management and categorization interface for all account data held across different banks. Boursorama Bank is currently the only bank to offer this feature, although other banks avoid direct comparison with their competitors which makes it difficult to assess account aggregation services at present. However, the technological advances of these new players are real and the agility, which comes from their “from scratch” mindset and information systems, should enable them to keep their edge.
In response, some banks are also innovating: the Crédit Agricole Store, for example, works with Bankin and Budgea and aims to have all aggregators use its APIs, which will allow aggregators to access their customers’ information without having to release it. The goal is to standardize authentication to enable customers to exercise their choices in total security – which is challenge of the future.
A further challenge is the ability of banks to derive information from data in an agile, secure, yet not overly costly manner. On one hand, they must comply with the Know Your Customer (KYC) standards, requiring that banks can demonstrate that they are familiar with their customers and have the ability to identify abnormal or restricted behaviour. They also must comply with the requirements for the Analytical Credit datasets (AnaCredit) for the European Central Bank (ECB), which aims to create a European statistical database for loans granted by financial institutions in euro zone countries.
On the other hand, banks, just like any other company, are expected to comply with the principles of Opt In and the European General Data Protection Regulation (GDPR). Furthermore, this regulation has recently been revised with new provisions that strengthen the control that citizens exercise over their data and expand their rights which include the right to oblivion, the right to carry data over to another service provider, or the right to data storage proximity.
Transforming constraints into a competitive advantage
Consolidating information system data to meet the dual requirements of increased knowledge of one’s customers and respect for their personal data is complex.
It is made even more complex by the rise of bank aggregators who have the capacity to centralize data from numerous accounts so a person’s entire financial situation is presented in a clear manner. Even though aggregated data remains the banks’ property, the results of any analyses carried out by aggregators, based on various operations conducted by customers on their platforms, belongs to the aggregators. Such granular customer information is useful not only in helping banks to meet regulatory requirements, but also for better customer relations management. It’s a major reason why banks should increase their proximity to aggregators in order to access such analyses and enrich their own databases.
Such a strategy utilizes effective data governance in order to consolidate all available information from banks and aggregators without infringing on citizens’ rights. In addition to being a condition for complying with regulatory requirements, this approach to data governance can also represent a real asset: a 360° view of customers to analyze behavior, detect abnormal cash transaction or even automate alert management.
Importantly, it can also be transformed into an asset to communicate with clients in a more knowledgeable and transparent way. By informing customers on the processes for managing their data, banks can build trust and strengthen relationships with customers that have become disenchanted with financial institutions.