WEF publishes report on appropriate use of customer data in Financial services

The rapidly growing significance of data in Financial Services provides both the industry and policymakers with tremendous opportunities as well as serious challenges.

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, today 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. 

“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,” said  Matthew Blake, Head of the Forum’s Financial and Monetary Systems Initiative. “This is why the stakeholders convened by the Forum identified a need for global principles.” The principles are:

• Control – “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.”
• Security – “Companies should be held responsible and accountable for data security.”
• Personalization – “Companies should be able to create individual customer-level profiles that allow them to provide differentiated customer services.”
• Advanced analytics – “Companies should be able to comprehensively test, validate and explain their use of data analytics and models to customers.”
• Portability – “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 today in collaboration with Oliver Wyman. 

The rapidly growing significance of data in Financial Services provides both the industry and policymakers 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 organizations, 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.