Daily, all money transactions, by individuals and corporate bodies, are carried out via some financial service providers, traditional among them being the commercial banks, insurance companies, mortgage banks/companies etc. But in the last decade, this has begun to take a rather different curve; due to the fast growth and disruptive development of the internet and information technology. Thanks to technological advances of the internet, mobile technologies, data analytics and artificial intelligence; financial services and products are now being offered by not just the banks and other traditional providers, but by a new sector known as FinTech. Fintech companies are beginning to take over bigger chunks of the total financial service market share; using mobile and internet powered products and services.
Despite this disruptive growth of the FinTech industry, a huge concern is beginning to arise. Can FinTechs ensure or guarantee the privacy of their customers’ data?
What is FinTech? A quick overview
According to Wikipedia, “FinTech (a portmanteau of Financial Technology) is the new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services. The use of smartphones for mobile banking and investment services are examples of technologies aiming to make financial services more accessible to the general public. Financial technology companies consist of both startups and established financial and technology companies trying to replace or enhance the usage of financial services of existing financial companies.”
The sphere of FinTech includes companies of all kinds that may operate in personal financial management, insurance, payments and basic transactions, assets management, etc.
Unlike the traditional financial service providers, FinTech companies build financial technologies using mobile and internet powered products to deliver financial services to both individuals and businesses. Notable in the industry is PayPal, which is regarded as the giant of the FinTech industry. Fintech companies bring financial services to a lot of customers who were not previously exposed to such services.
Collection of “alternative data” raises security and privacy concerns
FinTech companies collect a lot of data on their customers. They retain, store and analyze these information for marketing, sales, financial decision making; such as credit scoring and analyzing the credit worthiness of customers. The data collected include names, addresses, date of birth, telephone numbers, routing numbers, password, PINs, bank account details, social security details, etc. Besides this basic data, Fintechs are also collecting financial records and history, like rent, debt payments, employment and salary information etc. These are very sensitive and personal information of their customers.
Recently, Fintech companies are beginning to use what is known as alternative data to obtain unconventional information on their customers. This alternative data includes other sensitive and highly personal information such as customers online spending behavior, social network behavioral pattern (e.g. the kind of interaction they have, how they respond to certain issues online and what they post), the way they use the internet, and their psychological profiles, etc.