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You are exploiting my data. But whose data is it anyway and will you lose it?

At SIBOS last week the banks had an important discussion on possible new income streams. Payment and Know Your Customer (KYC) data are seen as major new business opportunities. All the data gathered by banks over the last 10 to 15 years for regulatory and compliance purposes has provided them with excellent insight into their customers. By combining the data collected as part of KYC programmes with, for example, transaction and even social media data, they have the opportunity to significantly enhance these learnings. One speaker suggested that the key question banks should ask themselves is what can we do with this information to better serve our customers and improve financial products? 

Opportunities from KYC and payment data

One banker described how the KYC data they have gathered from their small business customers has been put into practical use. In 2015, when the North Sea oil prices changed dramatically, they were able to mine the data to identify customers who would be potentially affected by this and reach out to them to offer help and assistance.

A consultant explained how they had helped a UK bank to help protect its corporate and business customers from fraud by analysing the daily clearing data and highlighting the potential questionable transactions that have occurred based on our analysis of payment transactions. The bank also found that its customers were really pleased their bank was looking out for them. It also helped the bank to build and enrich their relationship with their customer.

New data product development

Introducing new data-based products and services is a major challenge not just on a practical and technical level, but also because of the sensitivities involved with using personal data. Banks need to be careful to take account of the legal and regulatory considerations, such as making sure the right permissions are in place. Banks are well aware that they need to look at this problem from the end customer perspective who typically are happy with the data is being used to protect from fraud, but not if it's sold to 3rd parties to make money.

From a corporate point of view, the use of the payment and KYC data can bring clear benefits if it reduces fraud and also gives the bank more understanding of what credit they can offer. At the end of the day, there has to be benefits for both sides.

The banks have a problem because they have to have a careful balance between wanting to see the benefits from their investments in data services, whilst abiding by data sharing and protections laws. The General Data Protection Regulation coming out of the EU aims to give consumers and businesses more control of their data, so investing in data lakes and opening up data for insights is fine, but they need to be aware of the potential risks. 

Cyber fraud issues

The development of the new KYC exchanges and databases is worrying many corporates, e.g. a leading corporate treasurer mused, “But what if they get hacked?” Another concern is that banks might take advantage of the increased understanding not just to reduce fraud, but also to hassle us to sell many more products and services.


CTMfile take: The increased use of payment and KYC data by banks and third parties is inevitable and could bring great benefits, the issue for corporates is how are you going to protect yourselves from misuse and loss of this data? Corporates need to be involved in developing the framework around these new services, leaving banks and third parties to do it on their own is not sensible.


This item appears in the following sections:
Bank Relationship Management & KYC
Bank Fees Reconciliation & Negotiation
electronic Bank Account Management
Evaluating Banks' Overall Performance

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