How can the FS industry build confidence in using third-party services?
There’s definitely a pattern emerging in finance that is seeing power slowly flowing back to individuals with regards to their data. Where once banks ruled supreme, there’s now a market for fintech services to build layers on top of banks’ APIs under the EU’s PSD2 (Revised Payment Service Directive).
by Alastair Johnson, founder & CEO of Nuggets
Open banking opens up the door to a new industry, one that adds a lot of flavour to an otherwise bland landscape. Players initially dissuaded because of strict controls and rigorous compliance in banking no longer face such barriers to entry, and can bring to the table novel and more creative approaches. Many financial institutions have chosen to team up with fintech companies to combine established knowledge with cutting-edge technology.
There’s one barrier, however, that only keeps growing: mistrust. It seems that weekly, news breaks about a breach wherein malicious parties gain access to highly sensitive data. A recent study unsurprisingly revealed that 65% of consumers would trust companies more if they moved away from passwords in favour of biometric security. To make matters worse, only one third actually trust their banks to begin with. It’s evidently critical that the industry as a whole begins to rebuild confidence with consumers. I think the statistics speak for themselves: we need to step up security efforts.
How can we restore confidence?
Biometric authentication, whether facial or fingerprint, is building up momentum and, particularly in the case of the latter, is now available across a wide range of devices. Passwords are simply too easy to crack (and that’s if they’re not terrible to begin with). By contrast, a person’s fingerprint cannot be duplicated to gain access to an account. Aside from the obvious security benefit, it presents a much more convenient method of authenticating oneself, and sidesteps the need to carry around a notebook of passwords with strings of random characters and digits.
I think good policy is incredibly important in forging relationships with consumers as well. Of paramount importance is transparency (provided, of course, it doesn’t compromise the security of the company). Swiftly answering queries and resolving problems is vital to building trust.
On another note, I’m a strong proponent of blockchain technology, and I think that services in this sector should research its applications in their own business. I firmly believe it’s the next logical step in transitioning to a future where consumers can confidently interact with companies, without putting their information at risk. With zero-knowledge storage, individuals are in complete control of who sees their data and can grant or revoke access with ease. The sensitive information never touches a server, so the risk of breaches or unauthorised usage is nil.
The adoption of such technology, in my opinion, will no doubt cause some restructuring to financial institutions, as the emphasis on storage and data management will no longer be a concern (as an added bonus, this will greatly lessen the liability of companies under GDPR). Businesses will be able to shift their focus to building better, user-oriented applications centered around blockchain technology. Individuals can have confidence in secure interactions with any business, because there’s no need to trust.
About The Author
Alastair Johnson is the founder & CEO of Nuggets. Nuggets is an e-commerce payments and ID platform. It stores your personal and payment data securely in the blockchain, so you never have to share it with anyone — not even Nuggets.