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The increasing availability of data in the finance industry provides firms with the opportunity to gain deeper insights into market trends, customer behaviour, and exposure to risk. With the help of advanced analytics and machine learning, finance firms can use this data to improve their decision-making processes, increase efficiency, and ultimately drive growth.
However, the same data opportunity also presents a threat. As more data is collected, there is an increased risk of data breaches and cyberattacks such as ransomware, which can result in financial loss and reputational damage. When it comes to the financial services sector, banks have been subjected to attacks in recent years because of their increased reliance on the cloud and therefore third-party suppliers.
Additionally, there are compliance risks relating to the violation of data privacy regulations, such as GDPR or CCPA, which can lead to significant fines and legal liabilities. Therefore, while data presents a significant opportunity for finance firms, it must be managed responsibly and adequately funded to avoid potential threats. When paired with archaic infrastructure, it’s a matter of good fortune that we haven’t experienced even more breaches. There is an additional issue to consider which is that any injection of funding isn’t guaranteed to be directed towards cybersecurity resiliency. Therefore, regulators are realising that they can't rely on individual businesses to make the effort and rules need to be enforced.
Regulatory Adaptation: addressing the big data challenge
The big data challenge can take form through the tightening of regulations. For example, Financial Conduit Authority and Bank of England are looking at the Digital Operational Resilience Act (DORA) which aims to elevate operational resiliency by enhancing security requirements to reduce threats and risks deriving from the use of cyber devices.
The FCA’s strategy is to become a data-led regulator centred on making better use of data to spot and stop harm faster. This is essentially about exploiting data to deliver connected intelligence. This is one example of how regulators need to stay ahead of the curve in terms of technological advancements and adapt their approaches accordingly.
Navigating global data protection laws: challenges for UK companies
With the UK government introducing the UK Data Protection and Digital Information Bill in March of this year, businesses can cut down on pointless paperwork through the reduction of unnecessary and repetitive data collection pop-ups online. This will help them to better manage international customer expectations, particularly when such customers are increasingly wary of the consequences of non-compliance in terms of legal, financial and reputational damage.
The UK’s new data protection legislation represents a clear desire to break away from some of the bureaucratic obligations of the EU’s GDPR. However, in an increasingly global business environment, for most companies and financial services, these changes will alter very little. As other parts of the world implement GDPR-type frameworks, UK companies must still comply with international laws, or they will face a nasty surprise.
Companies operate in a global regulatory minefield. Unless they want to turn international customers away, or apply the stricter regulations to all data anyway, they’ll need airtight data segmentation policies that enable them to compliantly manage data from divergent markets differently. This means being able to quickly identify where each customer is based and implement the relevant data controls in accordance with their local data protection laws.
Regulatory red tape can pose significant challenges to the adoption of cloud computing in the financial services sector. However, with the right strategies, these hurdles can be overcome to ensure that organisations and governments can maximise the potential of cloud computing. By embracing standards and guidelines that promote security, privacy, and compliance, businesses and governments can build the necessary trust and confidence to adopt cloud computing with ease. Furthermore, collaboration between industry players, policymakers, and regulators can help create a favourable environment for cloud adoption and promote innovation. Ultimately, by overcoming this red tape, organisations and governments can leverage the benefits of cloud computing, such as scalability, cost savings, and agility, to drive growth and transformation in the digital age.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Oleksandr Strozhemin Co-founder and CEO at Trinetix
13 August
Elaine Mullan Head of Marketing and Business Development at Corlytics
12 August
Abhinav Paliwal CEO at PayNet Systems- A Neo Banking Software Platform
Donica Venter Marketing coordinator at Traderoot
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