The World Economic Forum has reported that a group of senior financial services industry executives from firms including HSBC, Allianz, and Ant Financial, along with public sector and civil society leaders from Bank of Canada, Australian Securities and Investment Commission, IMF and University of Oxford, working with the World Economic Forum, have published principles for the appropriate use of customer data in Financial Services. The principles provide goalposts for how banking, insurance and financial technology companies may approach questions around appropriateness, fairness, and transparency as they increasingly rely on the collection and use of customer data for business purposes. Policy makers can reference the principles as they continue to shape policy and regulation for the use of data.
According to the report members of the Financial Services industry aligned on global industry-wide principles on the collection and use of customer data, the World Economic Forum. The principles focus on control, security, personalisation, advanced analytics and portability and demonstrate the feasibility of achieving high-level consensus on customer data collection and use globally. The principles the report said were developed in response to concerns about fragmentation among customer data frameworks globally as a threat to data interoperability. Senior banking executives and public sector leaders will explore broader alignment with the global principles at a Forum organised meeting on the occasion of the IMF/World Bank Group Annual Meetings in Bali next week
According to Matthew Blake, Head of the Forum’s Financial and Monetary Systems Initiative “an uncoordinated proliferation of global data frameworks may prove counterproductive in the long run, resulting in further regulatory fragmentation with adverse knock-on effects for innovation and new business formation. This is why the stakeholders convened by the Forum identified a need for global principles.”
It said “companies should be clear about their use of customer data, attain customer agreement to their customer data policies and, where appropriate, seek consent for specific uses; companies should be held responsible and accountable for data security; companies should be able to create individual customer-level profiles that allow them to provide differentiated customer services; companies should be able to comprehensively test, validate and explain their use of data analytics and models to customers and companies should, where appropriate, allow customers to access, download, transfer and/or permit third parties to manage data about them.” The principles were presented in the White Paper The Appropriate use of customer data in financial services which the Forum published in collaboration with Oliver Wyman.
The report said that the rapidly growing significance of data in Financial Services provides both the industry and policy makers with tremendous opportunities as well as serious challenges. The role of data thus features prominently on the program of the Annual Meeting of the IMF/ World Bank Group from October 12-14 in Bali, Indonesia. The Forum will complement these discussions through its principles work and convene senior leaders from banks, finance ministries and central banks to discuss how to translate the principles into business practice and policy.
“This is best achieved by combining public regulation with private standards that represent the collective view of best practice and then buttressing them with a series of hard incentives that foster adoption and adherence,” says Mark Carney, Chairman of the G20’s Financial Stability Board and Governor of the Bank of England in the Forum White Paper. If the exchange of data for better services is to be a repeating win-win game, it is necessary to ensure that short-term gains do not generate new long-term risks or a general loss of trust between financial intermediaries and their customers,” said Carlos Torres Vila, CEO of BBVA and a contributor to the White Paper.
“Recent data breaches at large organisations, along with increasingly pertinent questions of trust around how customer data is being used or shared, have highlighted the urgency to review and define the appropriate use of customer data in financial services. The existing frameworks (e.g., GDPR, California) are necessary, yet insufficient. Implementing a shared set of principals will require a lot of work across the industry – and failing to do so could bring consequences ranging from overexposure to risk via in-activity to the stifling of innovation via overzealous regulation,” said Ted Moynihan, Global Head of Financial Services at Oliver Wyman. The Appropriate Use of Customer Data in Financial Services is the result of multiple senior leadership discussions and 50+ expert interviews with executives from incumbent financial institutions, leading financially-focused technology firms, and public sector and civil society organisations. The report presents principles addressing control, security, personalisation, advanced analytics, and portability aspects of the collection and use of customer data by financial institutions and fintechs.
The principles provide goalposts for how banking, insurance and financial technology companies may approach questions around appropriateness, fairness, and transparency as they increasingly rely on the collection and use of customer data in their evolving business models. Policy makers can reference the principles as they continue to shape policy and regulation for the use of data. The Forum stakeholders have aligned on a set of global principles through a series of roundtable discussions and interviews with industry executives and experts across multiple regions, thus demonstrating the feasibility of achieving high-level consensus on customer data collection and use practices globally. In addition to the principles, the White Paper also offers a roadmap for how both public and private sector stakeholders can align with those principles.
