At first glance, the world of social media and finance arent too similar. But as Mark Zuckerbergs address to the European Parliament in May showed, banking and Facebook share two sides of the same problem.
Social media has a huge distribution network, but many security flaws. In contrast, banks have strong security, but have yet to find an efficient way of distributing data. If social media cant get things right, why should the banks try to build their own capabilities?
Take MiFID II or the EU regulation on packaged retail and insurance-based investment products (PRIIPs). These two regulations require the production of numerous documents that then must be constantly collected and updated. This is something the industry has not previously had a mechanism for.
Read more: DEBATE: Should investors be concerned about Facebooks prospects?
Other regulations have heightened the need for the industry to distribute data which is becoming increasingly hard to get hold of. It is not difficult to see why. After all, data protection rules differ drastically from country to country, and all the major financial institutions operate globally. There has never been a more pressing need for banks to start exchanging key information from one central place.
Before an era fulled by regulation, this wouldnt have been so much of a requirement for banking boardrooms. The trouble is that there are now compliance tasks – fundamental to a banks day-to-day business – that can only be carried out through a more collaborative approach.
Take the collection and circulation of regulatory data and documents. The development of financial products and the subsequent distribution to investors are riddled with fiddly rules. As such, relatively straightforward tasks have now become complicated. Compliance now needs to know whether everyday tasks are in line with regulation, as financial supervisors demand more detailed reports.
Then there is a duplication issue. The evolution of regulations has left banks with a host of details scattered across all parts of the business. This has led to the risk of inconsistent info being used – which is only noticed when the regulator comes knocking.
Also, what about the end investor in all this? It could well be that they want to reach out to the provider of their financial product to ask a question. But its very difficult for them to provide answers if they cant get hold of the right information.
The Facebook case should provide food for thought to a financial industry grappling with its own data problem 10 years on from the crash. One difference is that there cannot be any “fake sources” in banking, unlike the fake news issue that social media has been dealing with. The best step forward is for the industry to seek out a secure and mutualised approach, through which market participants can bring their information together.
The era of ready-to-consume data in banking has arrived, so there should be nothing to stop everyone in the sector from “liking” and “subscribing” to it.
Read more: UK parliament "snubbed" as Facebook boss heads to Brussels
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