The GDPR, which stands for “General Data Protection Regulation,” is a set of laws that govern the storage and usage of important customer information and data by businesses operating within Europe.

However, GDPR compliance requires a lot of transparency from businesses to their customers regarding the collection, usage, and storage of their personal data. Moreover, it also requires that data which is no longer in use be disposed of safely, and if there is any data breach, it should be reported to the relevant authorities within 72 hours.

Although these additional regulations have proven challenging for businesses to comply with, FinTech companies are proving to be better positioned for GDPR compliance in comparison to more established financial institutions such as banks. This blog will highlight the competitive advantages that FinTech companies gain from GDPR laws.

What Results in a More Privacy-Conscious Customer Base Under GDPR?

GDPR regulations are a reactive set of laws because, prior to GDPR, there had been numerous high-profile data breaches that took place on a global scale, which also resulted in customer data falling into the wrong hands.

In fact, some businesses were also unethical in terms of how they exploited customer data in their marketing efforts. As today’s consumers are tech-savvy, they are aware of the dangers that data breaches can expose them to.

Hence, as a result, a more vigilant customer base is more likely to trust brands that are perceived as being tech-savvy. This is where FinTech companies gain an advantage over their more established and traditional financial institution competitors.

With GDPR-compliant FinTech companies, consumers can be assured about data security, as they know that the FinTech company is equipped with effective data handling processes and that its business model relies on the latest technology.

Being GDPR Compliant Is Less Costly for FinTech Companies

In general, GDPR compliance is considered to be a very costly and time-consuming process because, to be GDPR compliant, an organization needs to:

• Restructure its entire data collection,

   

• Data handling, and

   

• Storage infrastructure, among other things.

Moreover, new data destruction policies also need to be put in place to ensure that customer data is safely disposed of.

Therefore, some large, established financial institutions, such as multinational banks, may require a few months or even years to become GDPR compliant. Talking about startups, most store their data in numerous locations governed by different jurisdictions, and all of these jurisdictions may have different data handling laws.

However, this is not a problem faced by FinTech companies because:

• Most of their business is conducted online, and they already have streamlined data storage to better serve customers.

   

• Data destruction is also not a major issue for FinTech companies because most online servers have the right tools to ensure GDPR compliance.

   

• When it comes to physical drive destruction, there are affordable options such as degaussing and physical destruction of drives.

   

Overall, for FinTech companies, GDPR compliance is a cheaper and faster process, giving these companies a competitive advantage.

Implementing New Policies Is a More Agile Process for FinTech Companies 

GDPR compliance not only involves replacing the technological infrastructure a business relies on for handling and storing customer data, but it also requires an organization to overhaul its entire data management policy. This includes retraining employees, especially those who handle customer data, to ensure they understand their new duties and responsibilities under GDPR compliance.

This process can be lengthy and time-consuming, and some employees may face challenges transitioning to new rules. However, FinTech companies often find it easier to adapt to these data handling policies.

FinTech companies are accustomed to change, as they must constantly adapt to emerging technologies. Moreover, FinTech companies tend to have smaller teams compared to traditional financial institutions, making it easier to adopt and implement new policies across the organization.

GDPR Compliance Positively Affects a Brand’s Reputation 

A brand’s reputation can be a determining factor for companies operating in competitive sectors such as the FinTech industry. This has historically been a challenge for new market entrants competing against long-established financial institutions with strong brand awareness.

GDPR laws make it easier for new brands, especially FinTech companies, to compete with more established competitors.

GDPR compliance signals a brand’s commitment to privacy in its target market and can immediately make new clients more comfortable working with a brand that may not yet have strong market recognition.

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