A panel at last week’s Fintech Ideas Festival Policy Series in Washington, D.C., focused on how fintechs might affect the future of data and identity in financial services.
Banking and identity information are closely linked, said Mastercard’s Tim Murphy. He pointed out that a big part of banking is just using a verified identity to facilitate commerce. Payfone’s Greg Bonin added that increasingly digital transactions make identification more difficult and scale up risk.
New technology might solve these problems, but it also leads to new best-practice considerations.
Murphy is interested at present with the tokenization of the payments industry, which constitutes a fundamental upgrade of the system. “That is very powerful, and it will deliver better outcomes,” he said.
Spring Labs’ Adam Jiwan feels more strongly about blockchain, saying, “We believe blockchain can affect a lot of different stuff in this ecosystem.” Blockchain allows decentralization, effectively enabling crowdsourced identification verification. It also can improve transparency by making it easy to see users’ actions. The data sharing it allows might also reduce certain sunk costs, he said. Jiwan also expressed a wish for financial institutions to stop “hoarding data,” seeking a shift toward shared data systems instead.
Bonin said an important part of using customer data is allowing them to opt out, also known as the right to be forgotten. He warned that companies need to address this before regulators enforce it in a potentially less convenient way. Murphy said explaining new data practices to customers should be of immense importance to financial institutions.
Jiwan suggested that financial institutions could use machine learning to sift through data to identify threats and recognize and eliminate fraud, and Bonin said Payfone’s technology could passively authenticate users’ identity via their mobile devices without storing personal information for extended periods of time.
All these advances lead to an obvious question, Murphy said: “Whose data is it?”
The finance industry needs address “changing ideas about privacy,” Murphy said, adding that financial institutions should explain to consumers how anonymized aggregated data can be used without compromising personal data security. Financial institutions need to have conversations with customers about how and why they’re using their data, and such conversations are “essential for our future,” Murphy said.
Teresa Donnellan is an editor at SmartBrief.