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Ten theses on FinTechs in the financial industry and data protection

A study provides an overview of the German FinTech market, highlights the privacy statements of the new players with regard to the GDPR and discusses the question of potential regulatory measures.

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FinTechs offer many financial services such as real-time payments, Robo Advice or Crowdfunding. They occupy not only service niches, but increasingly take on classic banking activities. At the center of the new business models is usually the processing of – some very sensitive – customer data.

A study by Prof. dr. Gregor Dorfleitner, University of Regensburg, and Prof. Dr. med. Lars Hornuf, University of Bremen, on behalf of the ABIDA project with the support of the Federal Ministry of Education and Research, has taken a close look at the new digital players and their role in the financial sector.

Three analysis objectives in the field of FinTech

The study had three goals:

The analysis of FinTechs’ fundamental perspectives in Germany, the handling and use of user data by FinTechs and the investigation of further issues related to FinTechs’ data processing, such as FinTechs’ business models, FinTech’s cooperation with banks and regulatory issues.

An analysis of the privacy statements of 375 FinTechs active in Germany was carried out for the first time.

10 theses on fintech and data protection

The results of the analysis are reflected in the following ten theses:

A specific regulation for FinTechs does not make sense, but an adaptation of existing regulations to the digitization of financial services. Although big data currently plays a certain role in the FinTech sector, it is not very large in most cases. Almost all German fintechs collect to a certain extent data from their users, which is explicitly mentioned in the privacy statements, but is accepted by the users by consent without alternative. In the majority of cases, the privacy statements prepared by the FinTech companies do not conclusively state which data are processed and to whom they are forwarded.

The processing of personal data by third parties should be explained in a transparent and conclusive manner by the FinTech companies. Collaboration between banks and FinTechs creates added value for these two parties and, as a rule, for customers.

Fintechs and customer data

For the most part, FinTechs do not rely on customer data, which until now has been processed by banks, in order to be able to operate a sustainable business model, but rather to offer their customers sustainable added value. In the long term, it will no longer be the established financial institutions on the one hand and the fintechs as the antagonists on the other, but different financial services are offered by a variety of players. FinTechs can give private individuals or small businesses additional access to debt capital. Banks often enjoy greater customer confidence than FinTechs. However, this depends on the age of the customers as well as on the respective financial services and also becomes less over time.

Published inFintech

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