Despite the fact that the UK government is continuing to negotiate its acrimonious exit from the European Union, there is a tendency among some groups to believe that Britain is already exempt from EU rules. The UK will not leave the EU until March 2019 at the earliest, however, and until then it must continue to comply with the associated laws and legislation.
The same principle applies to business regulations and compliance, with SMEs currently preparing for the new GDPR (General Data Protection Regulation) legislation.
In this post, we’ll look at how this comprehensive regulatory measure will impact SMEs and fintech startups throughout the UK.
What is GDPR?
In simple terms, GDPR is a regulation that will unify data protection standards in all 27 EU member states. This new piece of uniform legislation will be applied in all of these nations from 25th May, meaning that businesses only have a further four months to prepare for any potential impact on their output.
The GDPR has a broad territorial scope, while it will also apply to any organisation that manages sensitive customer and employee data relating to individuals within the EU. Perhaps the biggest consideration for SMEs and start-up businesses is that cost of non-compliance, which has been increased to reinforce the importance of data protection in the digital age.
In general terms, total fines may amount to a maximum of €20 million, or 4% of annual global turnover. The issue of compliance will also be difficult to achieve, as the GDPR will set new standards and require organisations to implement stringent data protection measures in line with contemporary threats and technology.
How Will GDPR Impact on SMEs and Fintech Startups?
From an SME perspective, the biggest focus of implementation will surely target secure data management and processing procedures. More specifically, small businesses will need to invest more in secure servers and safeguards for data that is stored in the Cloud, while they’ll also be required to create strong contingencies in the event of a serious data breach. Failing to mitigate or respond effectively to a breach could trigger the highest sanctions, so firms will need to create an infrastructure to cope with such instances.
The issue is arguably even more pressing for fintech startups, who often operate is less regulated markets and industries. Similarly, fintech firms tend to handle sensitive customer data directly and in vast quantities, so that they can use technology to deliver financial services seamlessly.
With this in mind, fintech startups may need to reconsider the way in which they deploy their budget, as they look to spend more on ensuring that data is handled sensitively. For those that look to back prominent fintech firms through the financial and cfd markets, there may also be a need to approach options with caution while companies struggle to get to grips with the new regulations.
Companies that struggle with the implementation of GDPR may see their fortunes falter in the near-term, particularly fintech startups that rely heavily on the successful collation and utilisation of customer data.