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Sharing data might be difficult, but it’s the best way to unlock value 21 April 2021

A new Covid vaccine website in France demonstrates the value of open data.
Over the past year, we have all probably seen more charts, graphs, and figures than we ever anticipated. Is that a plateau? Is that curve rising or falling? Does that R number mean cases will rise or fall in the coming month? As an individual citizen, you can be forgiven for finding it difficult to parse the Covid numbers thrown your way.

Those difficulties, however, have also been present at a much higher level. Too many governments and policymakers have been flying blind in the Covid-19 pandemic due to a singular, but complex reason: faulty data. Whether it was how data has been collected and shared, delays in reporting, or just plain misinterpretation of the figures, it has been devilishly difficult for many to truly determine what has been happening away from the computer monitor and out in the real world.

This state of affairs is slightly perplexing given the central role data has come to occupy at the heart of 21st century society. Companies, governments, schools, you name it, rely heavily on data to arrive at decisions. Data is now integral to basic operations, no matter the industry. Or, as the saying goes, “Data is the new oil.” 

But unlocking real value in data is more difficult than shipping a barrel of oil (unless a boat is blocking your primary waterway). It requires high quality numbers, interpreting them correctly, and then making a smart decision with that information. As with decisionmaking in the pandemic, the financial services world has data at its core. It is built around transactions, payments, and accounts that all add up to an incredible amount of data in the hands of institutions. Even with the prevalence of digital data in the industry, however, many companies still fail to deliver enhanced experiences and relevant products for their customers.   

What’s the key to fixing data problems? Open it up!

Just as an oil company is loath to share their output with a competitor, so have financial institutions been guarded about their data. Yet, it is now dawning on many FIs that in order to deliver a superior customer experience to their customers, they must share their data with other companies.

Let’s return to the pandemic data example for a moment to illustrate how data sharing has played an important role in vaccination campaigns. The Covid-19 vaccine rollout in France (where Efma is headquartered) may have gotten off to a rocky start, but it has recently picked up speed. Thanks to a tool that relies on open source data that aggregates a number of different online health platforms, vitemadose.fr, French people are now being connected to a vaccine appointment in an easy and convenient way. A similar effort was very successful in New York City early in the spring. These were initiatives led by individuals who realized the key to a central vaccine site was pooling information from multiple different sources. That valuable information about an open appointment on a particular website does nothing if no one ever sees it. Data sharing works. And more importantly, brings benefits to everyday people.

In the financial world, there is a growing movement towards collaboration and open banking. Companies are finally widening access to their precious, proprietary data. In Europe, this is driven by PSD2. The EU initiative, finally coming into effect last year, requires European banks to open their API’s and infrastructure. PSD2 harmonizes products, infrastructures, and standards. The directive covers payment service providers, requires strong authentication, and opens up bank data to third parties. Banks no longer have a monopoly over your account data. Merchants can now access your data (as long as you grant permission first), without having to go through an intermediary party.

This new data-sharing paradigm should lead to more personalized experiences and insights for individuals and businesses. Products, services, and companies can be combined in efficient ways. Many fintechs are built around this very concept, seeking to become a centralized hub for a customer’s financial needs. Larger financial institutions can exploit the framework to partner with fintechs to bring exciting and relevant products to their customers.

Importantly, PSD2 will open up the market to competition. In a time when market concentration, especially in the tech sector, is a growing matter of concern, PSD2 helps level the playing field. With fintechs having access to the same data as traditional banks, it reduces a significant barrier to entry. New regulations often appear at first glance to be restrictive, but PSD2 looks set to promote a dynamism in the financial sector that will only be healthy in the long term.

Access to data will remain a contested issue, but as the data scientists on both sides of the Atlantic clearly demonstrated, the future is open. The quicker financial institutions embrace collaboration, the quicker they will be able to identify new and advanced ways of using data in more effective, remunerative ways.

Keywords:

Big data Innovation

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