By Neel Juriasingani, CEO and Co-Founder, of Datacultr.
rapid surge in digital transformation has significantly reshaped the lending landscape, making it more convenient and unrestricted than ever before.
The integration of technology and data analytics has allowed financial institutionsto simplify lending processes and leverage informed credit decisions.
However, with digitalization becoming mainstream, data protection has become critical. Knowing the distinction between data protection and privacy is important as well, while protection is about protecting from unauthorised use, data privacy defines who has the access. Very simply put, data protection is mainly building technical controls and data privacy is more of process and policy.
Both usually go hand-in-hand and play a crucial role in ensuring the trust, reputation, and sustainability of a tech-driven lending ecosystem.
It involves the protection of personal and confidential data from unauthorised access, usage, or disclosure. In a tech-driven lending ecosystem, gathering, processing, and storage of consumer data are crucial for determining creditworthiness, evaluating risk and furnishing personalised financial offerings.
However, in the absence of a robust data privacy mechanism, the ecosystem becomes exposed to data breaches, identity theft, fraud, and severe reputational harm. With innovative startups driving digitalization and tech enablement across financial services, for such ‘FinTechs’ to ensure data protection is imperative.
While users control which data they share and with whom, FinTechs need to ensure that the level of privacy is implemented and their data is protected, this could also be a go or a no-go decision for any enterprise that wants to engage with such FinTechs.
Maintaining customer trust is elementary in the lending industry as customers rely on lenders to manage their financial information responsibly and securely. Prioritising data privacy enables lenders to showcase their dedication to protecting customer data, fostering confidence among borrowers. This is crucial for the long-term viability of the lending ecosystem.
Furthermore, data privacy is not just an ethical commitment but also a legal necessity. Governments across the globe recognise the significance of safeguarding personal data and have implemented stringent regulations to ensure its protection.
Adhering to these regulatory frameworks is necessary for lenders operating within these jurisdictions and failure to comply can lead to harsh penalties and reputational damage.
Financial service providers, therefore, have very stringent requirements from a data protection standpoint and expect all their vendors to be compliant. Startups usually work within huge constraints and may find it hard to respond to such requirements, if presented as critical to do business.
While there is no easy path to it, it’s suggested that Startups should pick up one or two frameworks and get themselves certified. One of the prominent certifications related to data privacy is ISO/IEC 27001, which delivers a framework for establishing, executing, maintaining, and constantly optimising an information security management system. This certification exhibits a firm’s commitment to safeguarding customer data and complying with international standards.
Startups can significantly benefit from undergoing ISO certifications as it enhances their credibility in the market, assuring their customers and partners that their data is safe. This in turn allows them to garner a competitive advantage in the market. ISO certifications also furnish startups with an organised approach to mitigating data security threats, enhancing operational efficiency, and ensuring regulatory compliance.
Besides ISO, startups in the tech-driven lending ecosystem can also look at a framework like SOC2, which helps a startup to build and design its own controls to comply with the requirements of the framework. Based on the field of operation, startups may have to go through specific certifications, like PCI DSS for platforms handling payments and card information.
Such certifications reflect a commitment to global standards and serve as a growth driver for businesses. In addition, it is also recommended that FinTechs should organise periodic vulnerability assessments and data security audits.
At Datacultr, we regularly conduct VAPTs, we are also ISO 27001-2013, ISO 27701:2019 and SOC2-Type 2 certified.
While technology has allowed lenders to offer customised financial products and services tailored to individual needs and preferences, hitting the right balance between personalisation and data privacy is crucial. Startups need to start early and have in place a basic data protection and data privacy vision and philosophy, and yeah have relevant certifications in place as you embark on your growth journey.
