Partnering in a New Data Era - How Startups Can Help Financial Institutions
By Wei Hopeman, Co-founder & Managing partner, Arbor Ventures
We live in interesting times: the largest single community is Facebook with two billion daily active users; the largest consumer bank is WeChat, with nearly 800 million customers, and where over 1 billion shoppers will be responsible for over $1 trillion in cross border e-commerce transactions by 2020.
This change in the way communities are created and transactions are made means that businesses now have access to unprecedented amount of data from a plethora of sources, presenting both an enormous strategic opportunity as well as new challenges. Simply put - the information is abundant, but sorting through and harnessing that data is a business all on its own.
The difficulty is increased when considering the complex financial industry. Everyone, from established financial institutions to fintech startups, must manage, handle, make use of, and protect an ever growing dataset. The ever increasing complexity slows processes and creates friction resulting in cumbersome customer experiences - not what today's users are expecting in an evermore connected and increasingly personalised environment.
Requirements and concerns of the different stakeholders, including ecosystem partners, regulators and, ultimately, customers, are often contradictory, yet must all be taken seriously in order for the financial industry to continue thriving and for end users to increasingly trust that their data is being used appropriately.
Some of these issues which are becoming increasingly important within the financial and services industries are:
● Locking down data to protect customers while making it more user friendly.
Everyone, from established financial institutions to fintech startups, must manage, handle, make use of, and protect an ever growing dataset
● Easy access to insights gleamed from the data for different stakeholders, without having to be an engineer/ mathematician/data scientist.
● Compliance with country and regional laws with regards to data privacy, storage, and usage
● Merging of data stored in disparate sources, ensuring right alignments to maximize accuracy and applicability of knowledge.
It has become increasing difficult, if not, impossible, for a single institution to manage all these issues in a way that truly answers the overarching industry need. There is an increasing willingness on the part of incumbents to partner with startups to address and solve these core challenges. Some of these startups, for example, come from the cyber intelligence, compliance, and fraud detection sectors, showcasing a hint of the future technologies the world can expect.
A pioneer in the space of online transaction laundering prevention, EverCompliant uses advanced cyber intelligence techniques to give acquirers, PSPs, ISOs, hosting providers and online marketplaces insights into their merchant customers and protects them from association with illicit or otherwise illegal and brand damaging activities.
Another interesting startup leveraging data to combat financial crimes is ComplyAdvantage, which is building a proprietary AML database to provide real time monitoring and insights into behaviors of individuals and organizations.
As data becomes more abundant, accessing and integrating it in an efficient and cost effective manner require the ability to overcome technical and compliance bottlenecks, as wells as a highly fragmented and obscure data market. One example is DemystData, which focuses on enabling financial institutions to derive customer insights in real time through a single platform that accesses, matches, and structures a myriad of data.
Companies like Forter, Riskified, and NS8 - providing solutions to combat e-commerce fraud, removing friction in the shopping process, increasing revenue for merchants while reducing or eliminating chargeback risks.
The emergence of these new tools to understand and connect the plethora of interconnected data, creates a core opportunity spanning all stakeholders - the possibility of clearer and more effective business and customer relationships, understanding, and management, moving towards more technology enabled consumer experiences.