Innovation vs Regulation: a Balancing Act

By Polina Evstifeeva, Head of Regulatory Strategy, New Ventures, Corporate Bank, Deutsche Bank

The flourishing data economy, the emergence of fintech (financial technology) and bigtech (major technology) firms in the traditional-banking space and the growth of the crypto-assets market all promise the financial industry a new era of fresh competition, improved client service and innovative financial products. More fundamentally, these trends could also alter incumbent players’ business models and even financial-market structures.

Regulation will play a key role in shaping the face of this emerging landscape, defining the trajectory of change.

Managing competing data demands

A continuing trend we assess in Deutsche Bank’s recent white paper, “Regulation driving banking transformation”, is the growing “data economy”—a digital ecosystem in which data is collected, analysed and exchanged between governments, companies or other parties to create value for businesses and individuals. Here, big data is the basis upon which advanced analytics operate, which in turn can drive insights and improve client experience, uplifting the provision of financial services.

The data economy in the European Union (EU) was valued at €300 billion in 2016, equivalent to around 2 percent of the region’s gross domestic product (GDP)—which the European Commission (EC) predicts could rise to almost €750 billion next year, if backed by favourable policy and technology investment.[i]

The winners in this emerging data economy will be those that can best bring such benefits to clients, improving their businesses and saving them money. Given the prize at stake—and also the costs of falling behind—the importance of data collection, storage and analysis can only increase.

In this respect, regulatory-driven data-localisation requirements are a clear hindrance to consolidating rich pools of data. They significantly limit the depth of datasets for analysis…

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