FCA Consultation Paves Way for Mass Synthetic Data Innovation

Nils Bulling, Head of Strategic Innovation, Ecosystem & Digital Assets at Avaloq, responds to the FCA’s consultation, closing today, on the use of synthetic data to support financial services innovation.

As financial institutions realize the benefits of synthetic data for product innovation in a sector that is sensitive to data security and consumer protection, their use has increased dramatically in recent years. However, there are many untapped applications of synthetic data within the financial sector. The FCA’s latest consultation can help firms unlock this potential.

Unrealized potential

While synthetic data solutions are based upon real data, they do not have any client-identifying data. The simulation is authentic and mimics a production environment. It has higher volume and security than artificial databases and anonymized data.

Synthesized data can accelerate innovation, speed up internal proofs, and lead to greater accuracy and security when creating new digital banking products. Unfortunately, few financial institutions are using synthetic data to its full potential. Many are not sure where to start.

Synthesized data is used by the earliest adopters to improve their software development and testing, reduce reputational damages from potential data leaks, and achieve cost savings. They also have greater flexibility because third-party developers and partners as well as staff who work remotely in cross-border jurisdictions can use synthesized datasets in a safe and compliant manner.

Equal playing fields

A synthesized database speeds up the development process, prevents system failures and offers the freedom to involve partners at will – something that is becoming increasingly necessary in a financial ecosystem. The FCA’s consultation has the potential to level the synthetic data playing field by helping more financial institutions understand how they can capitalize on the technology and deploy it to their benefit.

For smaller financial institutions, it can be very difficult and costly to develop synthetic data solutions in-house. This consultation will shed light on best practices in the industry and provide an opportunity for firms to be educated about the benefits of standardized, affordable synthetic data solutions provided by technology providers. Clients will be able to benefit by this process, which allows them to accelerate product innovation and maintain high levels of security.

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