At the end of November 2020, the Financial Sector Conduct Authority (FSCA) published a research report on the impact of Non-traditional (Alternative) Data on the provision of financial services in South Africa.
“Alternative data has grown in prominence in South Africa and is increasingly being used by Fintechs and traditional financial institutions in serving customers. Data points like social site postings, digital footprint, online transactions, photo albums, sentiment and behavioural data, and group chats are increasingly being used to gauge consumer preferences and provide them with personalised offerings,” according to the FSCA.
The aim of the report was to understand emerging practices around the use of non-traditional data in order to make recommendations on key benefits and risks that financial institutions should take into account as they scale their offerings. The report captures some of these emerging trends by identifying specific use cases being developed, and also through a survey conducted on SA Fintechs.
The research also identified key benefits to consumers such as financial inclusion, personalisation, affordability, and enhanced customer experience. On the flipside the report identified risks such as data privacy, data protection, fairness and transparency as major challenges that would need to be addressed to ensure customers are sufficiently protected. The report recommends that this can be done by ensuring greater levels of transparency and informed consent, data security, data privacy and prevention of misuse/biases.
Click here to download the report.