Key benefits of address data in FinTech

It's valuable. It's a benefit of taking the location data and applying it in the FinTech space, but also understanding location as a big implication to credit risk and fraud.

Blog: Locating Location Opportunities in FinTech

Location data plays a key role in fraud detection and personalized experiences

As financial services continue to move into the digital age, the importance of accurate and reliable location data cannot be overemphasized. This data is essential for mitigating risks, preventing fraud, and improving the overall customer experience. Companies that rely on location data to power their business processes require a solution to ensure the data they use is both complete and trustworthy. Once integrated, location data can bring a variety of benefits and enable multiple use cases.

In a recent episode of ASK THE EXPERTS, we spoke with FinTech expert Thomas Dodds, the practice director of Data Architecture and Governance at Agilarc. Agilarc helps companies get value from their data through a well-defined architecture with a particular focus on agile services. Dodds has extensive experience in the business intelligence space, including data warehousing, data architecture, information delivery, and data governance. His multiple degrees in economics, accounting, information technology, and organizational leadership have helped inform his work in data management.

According to Dodds, one of the key benefits of address and location data for FinTech companies is fraud detection. "Understanding location has big implications for credit risk. Different models exist across the globe, so if I know where my customers are, I can implement the right credit risk model for that area of the globe," he said. FinTech companies that offer a broad array of products and services through digital means can also ensure that they are complying with relevant privacy regulations when collecting and using location information by being what Dodds refers to as pre-compliant.

"They need to plan for regulation that looks and feels a lot like what a brick and mortar or a traditional finance company is going to be subjected to. If you understood it and you're already walking to that level of standard, then when the regulation comes, it's not that big of a change."

However, regulations do change, and having a great strategy for change is absolutely vital. Knowing what to isolate as a change and how to absorb it is also crucial. "That comes down to knowing and utilizing what we call RegTech. It's regulatory technology," Dodds advised.

Geo-Location for Innovation

While regulation can sometimes hamper opportunities, Dodds sees plenty of innovative ways that FinTech companies can use location information to improve their products and services in ways similar to non-FinTech brands. "Think of proximity offers. You're close to the ATM, and you've got a bill due. Maybe the person doesn't necessarily have the app configured, but where the device is, you can end up prompting them."

Customization of the product mix based on your location is another area of opportunity. "You might not be able to have a product in a certain location. Well, don't suggest it to someone who's in an area that's not compliant," warns Dodds. "Enhanced fraud detection using AI and ML on location data can allow you to be streaming activity and find fraud happening as it happens."

According to Dodds, one of the biggest opportunities in the location data space is the ability to provide personalized experiences to customers. “Personalization is not just knowing your name and your purchase history, but also knowing where you are and being able to anticipate your needs based on that location,” he said.

Architecture is a Must

No matter the benefit, Dodds reminds us that architecture plays an important role in effectively using location information in FinTech. “Not only do you have to know your data, but you also have to know what and how you're going to use it. Architecture, being how that data is managed, is also responsible for having the data at the point of use and in a way to be used for that use."

There are still challenges associated with integrating location data into FinTech platforms. The biggest one, according to Dodds, is speed. "Things are happening so fast now. I can recall when we had data warehouses and people would call them 'real-time.' They were near real-time, but they're not real-time.  Now we are really REAL-TIME." Things are happening so fast that the idea of having the benefit of location and address verification data and having it at speed is a huge challenge. Loqate goes a long way to solving that challenge."

Plumbing is Plumbing

Despite focusing on FinTech, Dodds identifies common challenges and opportunities across multiple sectors. He believes that “the rules of plumbing apply regardless of the color of the water that's poured down the pipe.” There are certain things that are applicable within industries and across industries that are his go-to's. He often sees a misalignment between Business and IT, with the business trying to tell IT how to do their job and IT being adamant that they know what they're doing.

Another classic issue is data quality. Dodds recognizes that data is often not fit for the specific use due to a misunderstanding, ignorance, or omission of the use. To overcome these challenges, he recommends having solid answers to “why the data is needed, what the business value is, and what the use case is.”

Dodds also emphasized the importance of data governance when it comes to location data. “Data governance is critical. If you don't have the data governed, and you don't know what the data quality is, and you don't know where it came from, and you don't know how it was transformed, you can't really have trust in the data,” he explained. He added that data governance is important not only for compliance reasons but also for enabling better decision-making.

Accurate and reliable location data is crucial for FinTech companies to mitigate risks, prevent fraud, and improve the overall customer experience. The benefits of integrating location data into FinTech platforms include enhanced fraud detection, personalized experiences, and compliance with relevant privacy regulations. However, there are challenges associated with integrating location data, particularly when it comes to speed. Data governance is also critical to ensure the quality and trustworthiness of the data. Overall, location data has the potential to transform the FinTech industry in exciting and innovative ways. You can bet Dodds will bring the right kind of agile architecture to build on those opportunities.