For ‘Open Banking,’ Data is a Person

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The pandemic has accelerated the shift to digital financial services such as “open banking.” That has resulted in increased fraud, up an estimated 11 percent since the novel coronavirus hit.

What’s more, industry analysts say, defrauded customers are voting with their feet—to another bank or credit card service.

When it comes to “open banking, it’s all about the person, it’s all about the customer,” data scientist and privacy advocate Nick Curcuru told this week’s HPC + AI on Wall Street event. Data “is a person.”

Curcuru of Advanced Analytics Partners told the virtual fintech conference that financial services firms must be nothing short of “stewards of personal data.”

The scale of the data privacy challenge is immense, and HPC plays a critical role in protecting personal financial data. Mastercard, where Curcuru previously worked, processes about 2 billion credit cards a year. Those customers generate on the order of 205 million transactions every hour. That works out to about 76 billion transactions per year, the data analyst said.

Hence, open banking is emerging as an HPC use case as companies like Mastercard look to quickly add as many as 500 million new card holders. “They are not talking about cards, or countries or transactions,” Curcuru noted. “What they are talking about are people.”

Nick Curcuru

Hence, the financial sector must become “people-centric” in its efforts to mitigate financial risk, he added.

Among the emerging technologies for authenticating customer identity and thwarting fraudsters are biometrics, a sophisticated by costly security framework that traditionally has included everything from digital signatures and fingerprints to facial recognition and iris scanning.

The rub is justifying the investment in advanced biometrics, that is, “not just a fingerprint or a face, but how people interact with a device,” Curcuru said. Those processing-intensive characteristics range from pressure on a keyboard to screen interactions.

“What are those different biometrics that are unique? That takes a lot of processing,” the analyst said. “If you do those biometrics right, it becomes less intrusive” while still authenticating users.

Traditionally, risk assessments have focused on the narrow financial consequences of fraud. Recently, Curcuru said, more financial services firms have sought to add business development and customer service into their risk calculations.

“In the last three years, those companies that are bringing the business into [risk assessment] and the customer, they are starting to see growth.” The reason is protecting customer data is now a differentiator in financial services. Customers have “confidence that because you are now taking care of their data and information, they want to do business with you.”

A key metric for gauging risk associated with data breaches is the cost of losing customer records. Curcuru’s company, Advanced Analytics Partners, estimates the cost at $250 per record. Deploying biometrics and other rigorous data privacy measures designed to mitigate financial risks could help reduce that figure by an estimated 31 percent, or just under $150 per record.

The upshot, Curcuru argued: Protecting customer data is good for business as well as consumers.