The modern lending business is attracting more and more attention as digitization is sweeping through all aspects of our lives. This increased interest has led to ‘data explosion’ with the amount of financial data being produced online.
Technological advancements undeniably offer great potential for generating a new competitive market for companies and reducing transaction costs and time. It has allowed accurate identification of potential customers, a rapid compilation of financial data, reducing transaction costs and quicker work times, which ultimately led to faster loan processes.
Besides the opportunities the technology brings, there are also significant risks involved in lending. The biggest threat that might affect the business is data protection in modern lending framework.
Why is Data Privacy Crucial?
Firstly, the aim of data privacy isn’t to just protect the user data, but to protect the identity and maintain the anonymity of users in the lending business. For instance, any individual borrowing or lending money through his mobile or laptop can be easily traced by banks and telecom companies. This may lead their information to be leaked and misused.
Secondly, the lack of proper data privacy regulations can lead to harsher situations like frauds, scams or even blackmail. The acts of identity thefts have increased significantly in the financial market. According to the 2017 Data Breach Report released by Identity Theft Resource Center, a total of 1579 data breach incidents were tracked in America.
Thirdly, data privacy is necessary to ensure fair and user-friendly commerce and provision of financial services. It might be possible that banks and financial institutions might discriminate customers in providing services based on their personal factors, which would be unfair.
GDPR and Lending Industry
General Data Protection Regulation or GDPR is designed to increase data privacy laws across Europe. It has a great impact on companies that process EU citizen’s data – even if the company is not located in Europe.Many organizations have regulated their policies and procedures regarding the collection and usage of user data after the implementation of GDPR. Here are some pointers that showcase the impact of GDPR on the financial industry.
1. User Consent
GDPR sets a high standard for user consent offering individuals with greater choice and control over the collection and usage of their financial data. The lending companies are now required to ask for the individual’s consent before collecting and processing data. Moreover, they will also require maintaining a report of when, where, and how the user data is used. The users can withdraw their consent at any given point of time.
2. Right to Erasure Data
Users have the right to ask that their financial data be completely erased from the database or records of banks and financial institutions. This will also include the data shared by banks with any third-party organizations.
3. Third Party Management
Lending is a vast market, and it requires companies to share user data with multiple IT companies. Technological advancements have led the personal financial data to be accessed by external vendors which increases the data exposure. Under GDPR, vendors and third-party companies cannot disassociate themselves from obligations towards data access.
Data Protection in Modern Lending: The Conclusion
With the data being generated set to grow multiple folds in the coming years, a holistic strategy for data protection in modern lending business is essential. It has become an utmost necessity for the banks and financial organizations to ensure that users have full control over how the data is collected and is being used.
With the implementation of GDPR, the importance of data privacy in every industry has become more crucial. Organizations in the lending business need to be GDPR compliant to be future-proof and stay in business for long term.
Akeo Lending as a Platform
Akeo Lending is a modern and highly scalable lending solution for businesses to develop a customized online lending platform. The platform is designed to provide complete transparency in all lending processes including data processing and usage.
Some of the key features that the platform has to offer.
- Automated KYC/AML
- PSP Integration
- Automated Credit Check
- Bank and Third-Party Integration
Akeo Lending is a one-of-a-kind modular framework for online lending. Reach us to know more.