A regulatory environment that supports the safe and robust development of Big Data technology will be essential if banks are to meet the challenge of FinTech players, BigTech firms and crypto assets, according to Deutsche Bank.

A white paper published by the investment bank outlined the need for regulators and financial institutions to adopt a flexible approach to emerging technologies and warned that artificial intelligence (AI), Application Programming Interfaces (APIs), cloud and blockchain will not be to their full potential without rich and relevant data sets.

It also said that wide scale adoption of technology will be dependent on clients having sufficient trust to share their data with their service providers.

Thomas Nielsen, head of new ventures at Deutsche Bank, said: “The disruption enabled by new technologies continues its decisive march into financial services, whether it be in the shape of new players driving new business models, new products, or increased embrace of the power of Big Data.”

He explained: “Navigating and embracing such potentially tectonic shifts is never easy – but existing processes and rules are being challenged by changing consumer behaviours and looking the other way with the hope that this is a fleeting trend is a mistake that financial institutions and regulators cannot afford to make.”

While Open Banking initiatives have helped greater data sharing in the financial industry, the paper noted, they omit from scope data stored with other private companies which could otherwise enrich the analytics and, ultimately, the provision of banking services.

Polina Evstifeeva, head of regulatory strategy and new ventures at the bank, said: “As this issue becomes more prominent and important, regulators will likely face demands to lift such barriers – in a manner that ensures the protection of clients’ rights and the security of their data.”

In addition, the paper assessed the potentially game-changing impact of BigTech companies, which are advanced in consolidating, analysing and using clients’ data, and which are now turning their attention to financial services.

“While this drives competition, innovation and improved client services, the very distinct business models employed by BigTechs in financial services - which rely on the ‘data-network-activity loop’ - also trigger regulators’ vigilance around potential gaps, particularly when it comes to competition and data protection rules,” read the report.

A third transformative trend identified was the evolution of the crypto-assets market. Although the volumes of initial coin offerings (ICOs) or payments in crypto-assets still pale in comparison to traditional methods of capital-raising or payments facilitation, it noted that forward-thinking regulators have already made moves to provide much-sought-after regulatory clarity to set the path for the market’s development.

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