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Why Data Privacy And Protection Are Crucial For Tech Start-Ups

A rapid surge in digital transformation has reshaped the lending landscape, making it more convenient and unrestricted than ever before

Why Data Privacy And Protection Are Crucial For Tech Start-Ups
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Outlook Start-Up Desk

POSTED ON August 15, 2023 7:19 PM

Integrating technology and data analytics has allowed financial institutions to simplify lending processes and leverage informed credit decisions. However, with digitalisation becoming mainstream, data protection has become critical. 

Knowing the distinction between data protection and privacy is also essential; while protection is about protecting from unauthorised use, data privacy defines who has access. Simply put, data protection is mainly building technical controls and data privacy is more of a process and policy.

Both usually go hand-in-hand and play a crucial role in ensuring a tech-driven lending ecosystem's trust, reputation, and sustainability. It protects personal and confidential data from unauthorised access, usage, or disclosure. 

In a tech-driven lending ecosystem, gathering, processing, and storing consumer data are crucial for determining creditworthiness, evaluating risk and furnishing personalised financial offerings. However, in the absence of a robust data privacy mechanism, the ecosystem becomes exposed to data breaches, identity theft, fraud, and severe reputational harm.

Upping The Level Of Protection

With innovative start-ups driving digitalisation and tech enablement across financial services, for such fintechs to ensure data protection is imperative. While users control which data they share and with whom, they need to ensure that the level of privacy is implemented and their data is protected, this could also be a go or a no-go decision for any enterprise that wants to engage with such fintech start-ups.

Maintaining customer trust is elementary in the lending industry, as customers rely on lenders to manage their financial information responsibly and securely. Prioritising data privacy enables lenders to showcase their dedication to protecting customer data, fostering confidence among borrowers. This is crucial for the long-term viability of the lending ecosystem.

Furthermore, data privacy is an ethical commitment and a legal necessity. Governments across the globe recognise the significance of safeguarding personal data and have implemented stringent regulations to ensure its protection.

Adhering to these regulatory frameworks is necessary for lenders operating within these jurisdictions and failure to comply can lead to harsh penalties and reputational damage.

Financial service providers, therefore, have very stringent requirements from a data protection standpoint and expect all their vendors to be compliant. Start-ups usually work within huge constraints and may find it hard to respond to such requirements if presented as critical to do business.

While there is no easy path to it, start-ups should pick up one or two frameworks and get themselves certified.

Getting The Right Certifications 

One of the prominent certifications related to data privacy is ISO/IEC 27001, which delivers a framework for establishing, executing, maintaining, and constantly optimising an information security management system. This certification exhibits a firm's commitment to safeguarding customer data and complying with international standards.

Start-ups can significantly benefit from undergoing ISO certifications as they enhance their credibility in the market, assuring their customers and partners that their data is safe. This, in turn, allows them to garner a competitive advantage in the market. ISO certifications also offer start-ups an organised approach to mitigating data security threats, enhancing operational efficiency, and ensuring regulatory compliance. 

Besides ISO, start-ups in the tech-driven lending ecosystem can also look at a framework like SOC2, which helps a start-up build and design its controls to comply with its requirements. Based on the field of operation, start-ups may have to go through specific certifications, like PCI DSS, for platforms handling payments and card information. Such certifications reflect a commitment to global standards and serve as a business growth driver.

It is also recommended that fintechs organise periodic vulnerability assessments and data security audits. For instance, at Datacultr, we regularly conduct VAPTs; we are also ISO 27001-2013, ISO 27701:2019 and SOC2-Type 2 certified.

While technology has allowed lenders to offer customised financial products and services tailored to individual needs and preferences, balancing personalisation and data privacy is crucial. Start-ups need to start early, havee an essential data protection and privacy vision and philosophy, and have relevant certifications in place as you embark on your growth journey.

- Neel Juriasingani, CEO and co-founder of Datacultr 

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