How Can Fintech Companies Use GDPR As An Advantage?

The biggest advantage that fintech companies have is their flexibility and ability to adjust to new trends quickly. Traditional industries lack this fluidity which is why they are slower to respond to the changes that the GDPR (General Data Protection Regulation) requires. Even though non-compliance with GDPR legislation can cause serious financial and reputational harm, many of the traditional financial institutions are simply not ready to comply with the GDPR.

This is where fintech companies and especially new fintech start-ups have the ultimate advantage. Since these companies are all about embracing new financial technologies and systems, they are already compliant with most of the GDPR requirements. The GDPR envisages that businesses should be more transparent and open in their transactions. This is not a strong suit of traditional financial institutions and after centuries of operating with limited transparency, they are finding it difficult to adjust.

The cost of implementing GDPR Provisions

Another area where the GDPR is beneficial to fintech businesses is cost. Retroactively applying GDPR regulations is much more expensive than implementing them from the start. Here too fintech companies have the advantage over traditional banking systems. The costs related to getting a financial institution in ship shape and compliant with GDPR regulations are making it difficult for larger, more traditional financial institutions to compete with fintech companies in terms of pricing to customers.

This contributes to making it easier for fintech companies to enter the restricted and prohibitive financial services sector. GDPR guidelines for smaller firms are also more lenient than those that must be applied to larger companies and this too is aiding fintech companies in their quest to carve out a niche for themselves in the financial sector.

Selective customers

The GDPR, in combination with other factors, has had the effect of creating a new generation of customers who are much more privacy-conscious. These customers are looking towards new companies because many may feel that younger companies take privacy more seriously. Due to this, many customers are choosing to use more transparent fintech companies over traditional banks.

Fintech companies that can state that they are fully GDPR compliant also have a built-in advantage over other financial service providers because GDPR compliance bolsters customer trust. Young fintech companies can harness this to gain new customers who would otherwise turn to large and well-established financial institutions.

Remaining GDPR compliant

There is, however, one area where all companies are judged equally when it comes to the GDPR and that is remaining compliant. The general idea behind the GDPR is that customer data should always be protected, and that as little as possible personal data should be kept and used by companies. Compliance with this is assessed on a continuous basis so it is important that every fintech company makes sure that it remains GDPR compliant.

One of the most important areas of compliance is customer data destruction. This refers to disposing of data that is no longer needed or has become obsolete. It is essential Fintech companies have an effective data destruction policy so that a customer's privacy always remains intact. Many companies underestimate the importance of this aspect of the GDPR and as a result, they come up short when they are assessed for compliance. This can result in large fines and serious reputational damage.

Since fintech companies have fewer customers and less data than large banking corporations, it is easier for them to ensure that they follow the correct data destruction procedures and remain compliant.

Fintech companies are skilled regarding Technology

The agility and dependence that fintech companies have regarding technology make it easier for them to protect their customer's data. This results in fintech companies earning the trust of highly private clients more easily than larger financial institutions, which is another example of how the GDPR can be used as an advantage for the fintech industry.

In conclusion

The GDPR is here to stay, and it is important for every company to become GDPR compliant as soon as possible. The fact of the matter is that while many of the larger financial institutions are working hard at getting their affairs in order so that they can be GDPR compliant, fintech companies can focus on developing business and attracting clients. At first glance, it may seem that the GDPR is restrictive and punishing but from the above-mentioned points, it is easy to see that the legislation is working in favor of adaptable fintech companies and their clients.

Author Bio: Eoin has worked with Financial companies to ensure they have an adequate ITAD strategy to prevent data breaches and cybercrime.