Fintech's Big Data Future

How companies are leveraging data-as-a-service tools to speed up applications and deliver high-quality service.

Sam Rounds
12/06/24
10 min

Introduction

The fintech industry is in a period of unprecedented growth. While first generation fintech products were often built on traditional banking infrastructure, a new generation of fintech aims to deliver new financial services and products directly to digital consumers, often unmediated by traditional banking institutions. This change was accelerated by the COVID-19 pandemic, increasing demand for end-to-end digital financial services.

The next generation of fintech providers presents challenges, specifically in identity verification. These new fintechs must seek out new data sources and approaches to fully understand consumer identity if they wish to deliver new services efficiently while managing risk.

To better understand these needs, People Data Labs commissioned a survey of over 150 fintech professionals to assess the challenges and resources needed to deliver on the full promise of next-generation fintech solutions.

Methodology

To assess the state of the fintech industry, a cross-section of fintech professionals was surveyed. This included representatives from startups, established enterprises, and legacy financial institutions, totaling 156 professionals. The majority were from companies with between 500 and 5,000 employees. The fintech sector encompasses diverse services from consumer payments to institutional lending and cryptocurrency.

Privacy Challenges

The rapid expansion of the fintech industry has presented privacy challenges, particularly regarding navigating a fragmented regulatory environment. Respondents ranked concerns regarding privacy laws, with 69.2% stating this as their primary concern. The challenge is heightened by the need for fintech providers to handle sensitive customer data while leveraging third-party data amidst varying state privacy regulations.

Putting Data to Use

Fintech professionals noted that leveraging data for personalization and customer experience is crucial. Over 60% cited identity verification and risk mitigation as key purposes for data usage. This signifies a need for deeper understanding of customer identity, especially as fintechs move away from traditional banking infrastructures.

Powering Efficiency

Efficiency connects major fintech data use cases. Fintechs must verify customer identities quickly to process applications accurately. 67.9% of vendors identified enrichment of applicant records with additional data sources as a key strategy to understand potential customers better. Matching services to applicant profiles based on income and work history improves service delivery.

Fighting Financial Crime

As fintechs become disaggregated from traditional banking structures, they face heightened responsibility for customer due diligence and risk management. The industry is increasingly aware of issues concerning identity verification, with 90.4% highlighting credit and debit card theft as prevalent issues. Synthetic identities are a significant concern for 71.8% of professionals surveyed, as traditional verification methods may not be effective against these emerging threats, necessitating new data sources for risk mitigation.

About the Author

Sam Rounds
Sr. Product Manager, Data
People Data Labs

LinkedIn Profile

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