The proliferation of data gives rise to two challenges:
- Companies need to manage the vast amounts of data they now control and turn it to useful purposes.
- The availability of so much data has been an ideal environment for an explosion of various forms of cybercrime.
The role of data scientists and analytic technology will become increasingly important in the future. Companies which are able to attract the best data scientists and which use the analyses offered by the data will have an advantage in spending wisely, focussing their businesses and predicting trends. And they will pull away from those who don’t.
We recommend that companies invest in data analytics now. See our global big data guide.
Cybercrime is fuelled by the sheer volume of data available together with years of under-investment in security technology and the rise of the cloud – the dispersal of data means more points of access to it. The scale of distributed denial of service attacks, hacks, phishing scams, identity thefts and other assorted online fraudulent activities is reaching crisis proportions worldwide.
At the same time there has been a significant tightening of data privacy laws around the world increasing pressure on companies to secure their data (for example, see our post on the ECJ ruling that invalidates Safe Harbour). This affords opportunities in the data security products and services sector.
The financial services sector faces specific challenges of its own. Banks are grappling with the decentralisation of their services through digitisation. The growth of Fintech means that technology and e-commerce companies are now competitors to and partners with banks, all looking at pieces of the banking value chain which they can do better and more economically. The rise of cryptocurrencies will exacerbate this trend.
Banks have come to terms with the fact that having an effective digital strategy is a priority. It stands to reason that banks which get this right will be better placed than those which don’t. Getting it right will involve making smart investments, for example analysing what processes consume most employee time and concentrating on digitising those, instead of trying to digitise every process in the bank.
Accompanying this will be the change management of the shift. Technology on its own improves nothing. But people using technology competently and effectively can make a big difference.
First posted on Financial Institutions Legal Snapshot