That’s the question posed by FCA acting chief economist, Robin Finer, in a speech last week. Finer looked at the relationship between consumers, regulators and data – and how this might evolve.
We review what he said and how regulatory approaches need to adapt to match a changing landscape.
- The growth in data
As Finer points out in the speech, ‘We can’t move for technology and data these days – it’s in our homes and on the news, on our wrists and in our pockets’.
Data is everywhere – and a hot topic of debate due to its availability and value to large corporations. Personal and transactional data underpins the ability of many businesses to recommend and sell products and services to us.
Online businesses are built on data; Finer questions whether consumers, regulators, and even the businesses themselves understand the full value of the data that is given over and collected.
This in turn raises questions about how regulation should adjust to tackle issues around data in the digital economy.
- Three issues for regulators to consider
There are three key issues to think about when it comes to the value and role of data:
- The ways in which our data may create economic value for us as individuals
- The emotional value we place on data, and how this affects our willingness to share it with others
- The implications for companies who use our personal data for commercial gain
Policy-makers and regulators need to understand all three of these areas fully in order to create robust policies.
- The economic value of data for consumers
When we talk about data, there are typically two different types of data at play: ‘attribute’ data (data about our characteristics) and ‘behavioural’ data (data about the way we behave, for instance when making purchasing decisions).
Having both these sets of data enables businesses to predict our future behaviours and needs. This has benefits both for the consumer and the business.
From a consumer point of view, it can deliver a more personalised shopping experience, enabling companies to offer us products we might be interested in. This can save us time and give us an easier purchasing experience (as well, of course, as making money for the business in question!)
It can also deliver improved security, as well as convenience. Increasingly, we need to prove who we are when transacting online. Characteristics like fingerprints, as well as data like place of birth, first address and so on, can be used to verify identity and protect your security.
- The trade-off
Of course, there is a trade-off when giving out our data online. In return for a more bespoke shopping experience and access to global markets, we provide a wealth of information – some of it unconsciously. As well as the data you knowingly hand over in log-ons and in return for targeted marketing, websites are collecting information on your searches, your preferences and even the length of time you spend searching before purchasing.
There is a growing concern around transparency of data collection. While in part this has been tackled by new regulation, like the GDPR, there is still work to do in addressing data governance.
It has been shown that consumers place more or less value on their own data depending on the context. In other words, they are more willing to hand it over in some situations than others – as Finer says, ‘how much do we care about the product or service on offer, or our relationship with the firm?’
Consumers’ ability to make informed and objective decisions about handing over their data can be clouded by a lack of transparency regarding its use, as well as their own shifting views on its value.
This can in turn impact regulators’ ability to make their own informed judgments on issues around data use.
- What does this mean for regulation of data use?
It’s clear that data regulation is a fast-evolving area and that nobody, including the regulator, has the answer. The FCA is keen to understand the issues around data use better, saying that: ‘as a society and specifically for us as regulators, we need to improve our understanding of the value of these datasets, to firms and individuals, and how that value could change over time’.
Data underpins much of the online economy; ensuring this is managed in a compliant and ethical way is a priority for any regulator.
In regulation itself, data can also play an invaluable role; as Finer says, the data available should enable the FCA ‘to evolve and fulfil our role more effectively, keeping up with the progress in the markets we regulate’.
- Keeping pace with an ever-changing regulatory landscape
The changing economic and regulatory environment isn’t only a challenge for regulators. Compliance professionals, too, need to keep up with an ever-increasing rate of change, with new rules and regulations, changing business practices and a growing reliance on, and exploitation of, technology.