Turning the personal data tables

16 Jul 2021

Towards the end of last summer during one of the lockdown respites, we visited my son and his family to help with some DIY. I don't think I've been out-barbequed on many occasions (I like to think), but I was this time. So, like all good dads I said, "Well done, great meal. Where did you get your Kamado Grill?"

I'd tried to buy the same kit. Costco had sold out, but I found the last one available in the country on eBay. The problem was it was a lot more expensive than he had paid and, with a heavy heart, I decided to leave it until the following summer.

Surprisingly, things took a turn the following morning when eBay emailed me to say the item I had looked at was now available to me at a heavy discount - as long as I bought it that day. The outcome was inevitable. I was happy, the vendor was happy, eBay was happy, and the subsequent consumers of my slow-cooked beef briskets have been very happy.

Taking back data control

There is a quiet revolution underway that should give consumers the option to take back control of their personal data.

Currently, the internet is geared to helping the vendors of products and services. It all stems from companies gaining permission to use and share as much information as they can about us when we decide to download a new app or subscribe to an online publisher.

We generally lose control of our personal data by agreeing to the multiple pages of terms of use at point of sale. Advertisers are then able to put our personal data and browsing preferences to work and place supposedly relevant products and services in front us. Right now, there is quite a bit of money swilling around in the system but none of it goes to the owners of the personal data they are effectively trading i.e. the consumer himself.

It's clear there could be a better way of building real engagement with brands through a fair ‘data for value-added service' exchange. In other words, I give you some of my personal data and in return, I get discounts, vouchers, access to premium services and more. I become happier to share even more data as the trust increases and the benefits are evidenced.

According to an Accenture global consumer survey completed in 2019 about 60% of the consumers surveyed globally indicated that they would share more data with banks, insurers, or investment advisory firms if this translated into priority services, pricing benefits, more personalised products, or non-regulated advice. This percentage increases among younger and more digitally-keen consumers.

In financial services, there are few examples thus far of this sort of personal data economics in action. The Money Savings Expert ‘Cheap Energy Club' is one. It asks for information about your utility provider and current power usage and in return the Club can source cheaper tariffs and even provide you with a ‘one-click switch' service to a cheaper energy provider.

How might this work in the regulated financial product world? How can consumers control and monetise their data working with banks, life assurers, general insurers, automated advice platforms and more?

The OECD is trying to help build a financial consumer protection framework to put the consumer back on the front foot in this regard. According to the G20 High Level Principles on Financial Consumer Protection, Principle 8 covering ‘Protection of Consumer Data & Privacy': "Consumers' financial and personal information should be protected through appropriate control and protection mechanisms. These mechanisms should define the purposes for which the data may be collected, processed, held, used and disclosed (especially to third parties).

"The mechanisms should also acknowledge the rights of consumers to be informed about data-sharing, to access data and to obtain the prompt correction and/or deletion of inaccurate, or unlawfully collected or processed data."

Areas of current vulnerability for consumers which they are not currently fully aware of include:

• Data collected by providers during customer interactions.
• Data collected by providers on publicly available information (social media).
• Data shared with the provider by a third party such as a credit reference agency.

Sources of personal data are potentially rising exponentially with the rise of the internet of things (IoT) - connected devices have increased from 9 billion in 2013 to 50 billion in 2020, all collecting data including health-related information collected from smart wearables and telematics devices collecting details on driving behaviour. It does not end there, facial recognition technology can be used to predict Body Mass Index, smoking habits, chronological age.

Aggregation effect

Automated advice platforms naturally collect a lot of personal financial data to help build a personal financial plan with a view to saving for retirement or investing. Consumer data is processed by these platforms to understand clients' needs and assess risk tolerance, as well as to monitor and adjust the financial plan as things change.

Use of non-traditional means and artificial intelligence for credit scoring (when it used to be based on your ability to pay down your credit card bills) is another interesting development in this context. Credit rating agencies are now crunching numbers from numerous data sources which are less transparent, as are the methods of data analysis using proprietary algorithms which might unwittingly discriminate against you, based on your spending or earning patterns, or even lifestyle.

Financial Education is key

Open banking can deliver enhanced capabilities to the marketplace and allow consumers to access all their accounts (banking, savings, investments, etc.) in one single place, through a website or a mobile app.

This can contribute to the emergence of improved and innovative products and services, enhanced control for consumers over their financial lives, and increased competition in the provision of financial services coming from new market entrants and incumbents which innovate as a response.

The key aspect to consider from a financial education perspective is consumer consent and authorisation, and issues around consumer control. Any provider wishing to access the financial information of a consumer's account must ask for an authorisation.

Consumers should not feel coerced into granting access to sensitive personal information, such as past bank statements, unless they are aware of this and understand the implications. They should also be aware that they have the right to revoke authorisation to access, use, or store data.

However, the increased availability of personal data and augmented processing capacity also gives financial service providers (whether traditional ones or fintechs) the ability to send targeted offers, which can make it more difficult for consumers (especially those with low levels of financial literacy and awareness) to compare products.

We are generating an ever longer and richer trail of personal data to be potentially abused - making any movement to take back control all the harder.

GDPR protects

Interestingly, GDPR rights include:
"The right not to be subject to decisions based solely on automated processing including profiling, when this bears legal effects or significantly affects him or her."

In other words, this protects consumers from being excluded from certain financial products in an automated fashion based on data the aggregators have on you out there. You also have a ‘right to be forgotten' in the worst-case scenario of course. Although for credit scoring this will not help you, as your history of paying back debt and honouring loan agreements is key to a positive score.

What's clear is that even with new consumer protections such as GDPR and protections promoted by the likes of the OECD, too many consumers are still not taking control of what personal data they give away to whom. Very few are deriving any financial benefits from trading their financial data yet.

So, is there a potential to turn those data tables if consumers feel strongly enough about it? The data tells us that younger people care a lot less about this issue and think themselves savvy enough to sidestep the inevitable financial scams with which they are being targeted.

Will consumers lead the charge and take back control of their personal data? Will they install browser extension tools like Gener8 that control which ads are sent to our browsers? What are the implications for financial services and wealth managers?

How do we still get ‘too good to miss' offers on essential barbeque upgrades, without having a constant barrage of speculative and poorly directed advertisements?

by Andrew Martin, Chief Distribution Officer at Dunstan Thomas.
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