Changes in the financial sector provides opportunities to develop privacy-protecting instruments; unfortunately, the efforts of the industry are not very often put in this direction.

Financial institutions are collecting and analysing a growing amount of data about us, in order to judge us and make decisions on things like creditworthiness. Increasingly, financial services such as insurers, lenders, banks, and financial mobile app startups, are collecting and exploiting a broad breadth of data to make decisions about people. This has a huge variety of possibilities: the tracking of cars to charge for insurance; reading the contents of your text messages to determine if you’re suitable for a loan; seeing who your friends are to determine your interest rate. The financial sector is changing in how it uses data. This has to be of particular concern when it affects the poorest and most excluded in societies.

What Is The Problem

More and more data are used to make or shape decisions that determine access to financial services, from sources that are far beyond the scope of what people might think as ‘financial’. Thus, just as there is an incentive today for people to manage their credit file and behave in a way to maximise their credit, so too is there an incentive to change behaviours more broadly. What affect will it have; should we post on Twitter differently if we’re planning on applying for a mortgage? Is a particular friendship dragging down your credit rating?

The judgements that are made about us from these new sources of data are frequently opaque, with the decisions made without the knowledge of the person involved. There are ways in the agency of people are diminished by these developments: decisions are made not on the information that we choose to provide, but rather other sources: how we fill in an online form (our location, the device we’re using, whether we’ve read the Terms and Conditions) becomes more important than the information we provide on the form. 

There’s also increasingly few ways of opting out from this collection. If we don’t give the insurance company more data about our lives, we risk higher premiums.  The option to protect our privacy is increasingly being taken away; for example, cash is increasingly been portrayed as “immoral” while at the same time all the alternatives for most double as ways of collecting vast amounts of data about us.

What Is The Solution

The privacy challenges posed by fintech must be met in various ways. The financial sector is undergoing technological change, which provides opportunities to develop privacy-protecting instruments; unfortunately, the efforts of the industry are not very often put in this direction. Similarly, we need a regulatory framework that meets the new challenges. Much of the world already has tight controls over some kinds of financial data – for example, the data held by credit reference agencies – but we’re now in a situation where “all data is credit data”, as the formed CIO of Google put it.

What PI Is Doing

PI is conducting ongoing research in the financial services sector, engaging with startups, policymakers, regulators and activists in countries across the globe. By critically engaging with the sector, we can begin to identify the new challenges and begin to develop the technical, legal and social change that we want to see.