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Monday, October 15, 2018

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Opinion > Capco Nordics

New business models for data-driven banking

Åke Freij, managing principal at Capco Nordics | 07:27 Wednesday 3rd October 2018

In the post-GDPR financial services landscape, new business models will emerge which will see providers serving their clients as collaborative networks, using standardised platforms and proactively managing new regulatory demands.

 So, what might these look like?

In the post-GDPR financial services landscape, new business models will emerge which will see providers serving their clients as collaborative networks, using standardised platforms and proactively managing new regulatory demands. So, what might these look like?

Network orchestrator and quality assurer

Where financial partners (banks, advisers, fintechs, agents, fund evaluators etc) can be both controllers and processors – as defined by GDPR – firms and customers need to understand where and how data is placed and used.

For consumers, trust is paramount. Think Amazon. Customers are more likely to trust Amazon sellers knowing they have been ‘vetted’ and that there are effective protection measures in place if things go wrong.  

Creating and orchestrating Amazon-style financial ecosystems will anchor banks in a position of trust with participants and end-users. Significant value will also be added from being a reliable one-stop shop for a wide array of financial services products and services.

Designer of robust and scalable platforms

Dealing with large volumes of data will require powerful digital platforms. In May 2018, a group of Nordic banks announced plans to develop a KYC infrastructure platform for the region. It will facilitate sharing customer credentials, crime prevention and customer protection. In a similar fashion, banks could team up to design common data platforms.

But while standardised systems are the goal, banks need to optimise legacy IT. Existing applications are good at performing established, repetitive tasks. They may not support innovation, but replacing multitudes of old systems is a matter of risk and cannot be achieved in a meaningful timeframe. GDPR highlights the need for application portfolio management and making the most of ‘good legacy’ to ensure secure data protection processes.

Facilitator of dynamic regulatory management

It is likely that we will see GDPR2, MiFID III and PSD3 as data-related regulations strive to keep up with the advances in technology and the data economy. Yet firms are still treating compliance projects as one-off, static and siloed implementations.

What’s missing is a function for strategic regulatory management and a mindset to see innovation in every compliance project. The former requires data supply chain and sophisticated interfaces to support the strategic and operational management of regulatory impact. The latter relies on five design principles to improve management of regulations in the future:  

  1. digital economy grade data quality
  2. instant counterparty management
  3. full API connectivity
  4. customer interaction
  5. regtech plug-in architecture

Over time, the function for strategic regulatory management will enable proactive and speedy responses to new regulatory demands.

If banks don’t establish one or more of the above business models they risk lagging behind the competition. These models will also realise value in the wake of future regulations in the data domain. As a quick win, assessing the validity of future business models will prepare banks for the next wave of GDPR management and help send the message to staff and customers that GDPR is about proactive and positive ways to drive value and competitive advantage, with innovation as a starting point.  

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