Using Personal Data for Analytics Requires Balancing Accessibility and Security

Digital transformation of financial services is driving an increasingly automated analytics process in which personally identifiable information (PII) about borrowers is transmitted and stored in the cloud as part of the application review and underwriting process.
Lenders need PII to make lending decisions. But, at the same time, financial institutions must protect the privacy and security of consumer information, whether in the cloud, at the edge, or stored in an on-premises data center.
The global pandemic has accelerated the growth of mobile banking, and financial institutions are embracing everything from online loan applications to digital wallets. Financial technology (fintech) is increasingly being used for on-boarding customers remotely, and for using data stored in the cloud to authenticate users and to provide access to online accounts.
A Fannie Mae Lender Sentiment Survey found that 63% of lenders say APIs that enable easier borrower qualification and verification are among the top technology solutions with the greatest potential to streamline business processes. APIs that transmit PII via the cloud are a key to streamlining mortgage and loan processing for consumers.
Managing Personally Identifiable Information
The heavily regulated financial services sector has long been a leader in safeguarding personal information. But now, with PII shared and stored in the cloud, the stakes are even higher.
In the United States, increasing protection for consumer data is on the radar of government regulators. The Data Protection Act of 2021, under consideration on Capitol Hill, would create more stringent data privacy standards that would be enforced by a new Data Protection Agency.
While the outcome of the new legislation remains to be seen, it is a harbinger of new laws to protect PII. On the state level, the California Privacy Rights Act of 2020 (CPRA), which replaced the previous California Consumer Privacy Act (CCPA), exemplifies this regulatory sea change. The CPRA creates even tougher data privacy provisions than its predecessor.
One industry group proactively addressing the need for more stringent PII protection is the Financial Action Task Force (FATF). The FATF has, for example, developed guidance to help governments, financial institutions, and other regulated entities determine whether a digital ID is appropriate for use for customer due diligence.
Of course, a digital ID solution is only as good as the integrity of the system that protects the PII of its users. Financial institutions need secure software and networks that can protect the PII used to verify borrower data and authenticate user access to accounts. When it comes to “know your customer” automation, lenders want automation tools that are fast, accurate, and secure. Financial institutions need to be able to parse PII in real-time as they classify, capture, detect, and analyze massive amounts of transactional data.
Using PII for Loan Underwriting
Some of the leading fintech companies – such as PayPal and Square – use automation that can transform documents into digital data and provide analytics reports within minutes, with over 99% accuracy. Moreover, lenders like Plaid and Sprout Mortgage use automation to secure and protect PII as part of the digital mortgage process. This saves time and money for financial institutions and enables mortgage professionals to focus on underwriting, compliance, and approval.
Financial services companies need to implement cloud-based solutions that are scalable, easy to implement, and secure. It is also important to find a fintech partner that facilitates more than just data transfer and storage. Financial institutions need intelligent document processing and automation that provides underwriting analytics related to a borrower’s income, assets, cash flow, and other PII.
Automation enables the use of PII in the decision-making process – expediting the underwriting process and reducing consumer friction. Lenders depend on robust and secure fintech to ensure user authentication, deter fraud, facilitate redaction of personal data, and create an audit trail for compliance.
Digital technologies enable lenders to efficiently deliver personalized borrower solutions that are enabled by accurate and secure data validation. Automation is here to stay. For financial institutions, the challenge is to partner with vendors that can analyze, manage, and protect PII, from the edge to the cloud.
About the Author:
By David Snitkof, Vice President of Analytics, Ocrolus
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