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New data rules raise business trust challenges

When the General Data Protection Regulation comes into effect on May 25th, financial services firms will face a new potential threat to their on-going challenges with building strong customer relationships, writes DARREL ORSMOND, Financial Services Industry Head at SAP Africa.

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The regulation – dubbed GDPR for short – is aimed at giving European citizens control back over their personal data. Any firm that creates, stores, manages or transfers personal information of an EU citizen can be held liable under the new regulation. Non-compliance is not an option: the fines are steep, with a maximum penalty of €20-million – or nearly R300-million – for transgressors.

GDPR marks a step toward improved individual rights over large corporates and states that prevents the latter from using and abusing personal information at their discretion. Considering the prevailing trust deficit – one global EY survey found that 60% of global consumers worry about hacking of bank accounts or bank cards, and 58% worry about the amount of personal and private data organisations have about them – the new regulation comes at an opportune time. But it is almost certain to cause disruption to normal business practices when implemented, and therein lies both a threat and an opportunity.

The fundamentals of trust

GDPR is set to tamper with two fundamental factors that can have a detrimental effect on the implicit trust between financial services providers and their customers: firstly, customers will suddenly be challenged to validate that what they thought companies were already doing – storing and managing their personal data in a manner that is respectful of their privacy – is actually happening. Secondly, the outbreak of stories relating to companies mistreating customer data or exposing customers due to security breaches will increase the chances that customers now seek tangible reassurance from their providers that their data is stored correctly.

The recent news of Facebook’s indiscriminate sharing of 50 million of its members’ personal data to an outside firm has not only led to public outcry but could cost the company $2-trillion in fines should the Federal Trade Commission choose to pursue the matter to its fullest extent. The matter of trust also extends beyond personal data: in EY’s 2016 Global Consumer Banking Survey, less than a third of respondents had complete trust that their banks were being transparent about fees and charges.

This is forcing companies to reconsider their role in building and maintaining trust with its customers. In any customer relationship, much is done based on implicit trust. A personal banking customer will enjoy a measure of familiarity that often provides them with some latitude – for example when applying for access to a new service or an overdraft facility – that can save them a lot of time and energy. Under GDPR and South Africa’s POPI act, this process is drastically complicated: banks may now be obliged to obtain permission to share customer data between different business units (for example because they are part of different legal entities and have not expressly received permission). A customer may now allow banks to use their personal data in risk scoring models, but prevent them from determining whether they qualify for private banking services.

What used to happen naturally within standard banking processes may be suddenly constrained by regulation, directly affecting the bank’s relationship with its customers, as well as its ability to upsell to existing customers.

The risk of compliance

Are we moving to an overly bureaucratic world where even the simplest action is subject to a string of onerous processes? Compliance officers are already embedded within every function in a typical financial services institution, as well as at management level. Often the reporting of risk processes sits outside formal line functions and end up going straight to the board. This can have a stifling effect on innovation, with potentially negative consequences for customer service.

A typical banking environment is already creaking under the weight of close to 100 acts, which makes it difficult to take the calculated risks needed to develop and launch innovative new banking products. Entire new industries could now emerge, focusing purely on the matter of compliance and associated litigation. GDPR already requires the services of Data Protection Officers, but the growing complexity of regulatory compliance could add a swathe of new job functions and disciplines. None of this points to the type of innovation that the modern titans of business are renowned for.

A three-step plan of action

So how must banks and other financial services firms respond? I would argue there are three main elements to successfully navigating the immediate impact of the new regulations:

Firstly, ensuring that the technologies you use to secure, manage and store personal data is sufficiently robust. Modern financial services providers have a wealth of customer data at their disposal, including unstructured data from non-traditional sources such as social media. The tools they use to process and safeguard this data needs to be able to withstand the threats posed by potential data breaches and malicious attacks.

Secondly, rethinking the core organisational processes governing their interactions with customers. This includes the internal measures for setting terms and conditions, how customers are informed of their intention to use their data, and how risk is assessed. A customer applying for medical insurance will disclose deeply personal information about themselves to the insurance provider: it is imperative the insurer provides reassurance that the customer’s data will be treated respectfully and with discretion and with their express permission.

Thirdly, financial services firms need to define a core set of principles for how they treat customers and what constitutes fair treatment. This should be an extension of a broader organisational focus on treating customers fairly, and can go some way to repairing the trust deficit between the financial services industry and the customers they serve.

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Notre Dame, Scoop Makhathini, GoT, top week in search

From fire disaster to social media disaster, the top Google searches this week covered a wide gamut of themes.

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Paris and the whole world looked on in shock as the 856-year-old medieval Catholic cathedral crumbled into ash. The tragic infernal destruction of this tourist attraction of historical and religious significance led South Africans to generate more than 200 000 search queries for “Notre Dame Cathedral” on Monday. Authorities are investigating the cause of the fire that razed the architectural icon.

In other top trending searches on Google this week, radio presenter Siyabonga Ngwekazi, AKA Scoop Makhathini, went viral when it appeared he had taken to Twitter to expose his girlfriend, Akhona Carpede, for cheating on him. Scoop has since come out to say that he was not responsible for the bitter rant and that his account was hacked. “Scoop Makhathini” generated more than 20 000 search queries on Wednesday.

Fans generated more than 20 000 search queries for “Sam Smith” on Tuesday ahead of the the British superstar’s Cape Town performance at the Grand West Casino. Smith ended up cutting his performance short that night due to vocal strain.

Local Game of Thrones superfans were beside themselves on Sunday, searching the internet high and low for the first episode of the American fantasy drama’s eighth season. “Game of Thrones, season 8, episode 1” generated more than 100 000 queries on Google Search on the weekend.

As the festivities kicked off in California with headliners such as Childish Gambino and Ariana Grande, South Africans generated more than 2 000 search queries for “Coachella” on Saturday.

South Africans generated more than 5 000 search queries for “Wendy Williams” on Friday  as it emerged that the American talk show host had filed for divorce from her husband Kevin Hunter after 21 years of marriage. Hunter has long been rumored to have been cheating on Williams, which reportedly finally led to the divorce.

Search trends information is gleaned from data collated by Google based on what South Africans have been searching for and asking Google. Google processes more than 40 000 search queries every second. This translates to more than a billion searches per day and 1.2 trillion searches per year worldwide. Live Google search trends data is available at https://www.google.co.za/trends/hottrends#pn=p40

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5G smartphones to hit 5M sales in 2019

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According to the latest research from Strategy Analytics, global smartphone shipments will reach a modest 5 million units in 2019. Early 5G smartphone models will be expensive and available in limited volumes. Samsung, LG and Huawei will be the early 5G smartphone leaders this year, followed by Apple next year.

Ken Hyers, Director at Strategy Analytics, said, “We forecast global 5G smartphone shipments will reach a modest 5 million units in 2019. Less than 1 percent of all smartphones shipped worldwide will be 5G-enabled this year. Global 5G smartphone shipments are tiny for now, due to expensive device pricing, component bottlenecks, and restricted availability of active 5G networks.”

Ville Petteri-Ukonaho, senior analyst at Strategy Analytics, added, “Samsung will be the early 5G smartphone leader in the first half of 2019, due to initial launches across South Korea and the United States. We predict LG, Huawei, Xiaomi, Motorola and others will follow later in the year, followed by Apple iPhone with its first 5G model during the second half of 2020. The iPhone looks set to be at least a year behind Samsung in the 5G smartphone race and Apple must be careful not to fall too far behind.”

Neil Mawston, executive director at Strategy Analytics, added, “The short-term outlook for 5G smartphones is weak, but the long-term opportunity remains huge. We forecast 1 billion 5G smartphones to ship worldwide per year by 2025. The introduction of 5G networks, by carriers like Verizon or China Mobile, opens up high-speed, ultra-low-latency services such as 8K video, streaming games, and augmented reality for business. The next big question for the mobile industry is how much extra consumers are really willing to pay, if anything, for those emerging 5G smartphones and services.”

Strategy Analytics provides a snapshot analyses for the outlook for 5G smartphone market in this Insight report: 5G Smartphones : From Zero to a Billion

Strategy Analytics provides a deep-dive into the air-interface technologies that will power phones through 2024 across 88 countries here: Global Handset Sales Forecast by 88 Countries and 19 Technologies : 2003 to 2024

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