Financial Technology ….. Changing the game AGAIN !
GLB, Dodd-Frank, Safe Harbor and a plethora of other regulations have been the focus of financial organizations since the crash of 2006-2008. CEO’s have concentrated on making the financial industry safer and more open. At the same time, financial startups are focusing on new ways of addressing financing and meeting the needs of a diverse clientele.
The critical aspect of the major changes in the Financial Industry is data, lots and lots of data. Up to date, secure data is critical for organizations to improve the services that they offer. And customers want more data to be able to anticipate, understand and manage their financial transactions.
Let’s look at the way that organizations assess risk. Newer lenders such as OnDeck, Kabbage and others bring in enormous amounts of data from many sources, including social-media, to assess the credit worthiness of potential borrowers. Leveraging data-driven algorithms for lending decisions has advantages over the use of a single credit score to determine credit worthiness. This can remove many of the aspects of prejudice and regional concentrations that may be embedded in some firms.
Then there is a totally new paradigm that is being fostered by Bitcoin, the blockchain. Essentially, the blockchain is a way for having a reliable, shared database for exchanging assets. Bitcoin espouses anonymity, but some organizations are experimenting with blockchains that are transparent. The goal is to have a system of safe, authenticated and verified real-time transactions with our financial institution. Distributed ledgers demand more and more data, but may also reduce some of the overhead for financial institutions to process transactions and thus lower the cost of doing business.
But how to manage all of this data? It cannot take weeks to restore databases for testing or problem resolution. These time frames must be brought down to hours or minutes. Additionally, security must be built in. There cannot be out of control environments where so many copies of data exist, that no one know where they are, why they were created or who is using them and many of them without controls or protection. The game is changing, but are our Financial organizations up to the game!