REVISTA THE ECONOMIST
17 Febrero 2017
Internet, Modernización de Empresas, Retail, Tarjetas y Pagos Electrónicos, Tecnología Personal
Should our bankers and insurers be our Facebook friends?DONALD TRUMP’s health-insurance premiums could soon go up, and not just because of his love of burritos. Data-crunchers have found a link between the negativity of someone’s tweets and his risk of dying of heart disease. The education levels of your Facebook friends or the activity on your phone can help reveal how likely you are to repay a loan. Money-managers are rummaging ever more curiously through customers’ digital lives. Trading data
This is all part of an “intensifying data arms-race in finance”, says Magda Ramada Sarasola from Willis Towers Watson, a consultancy, which claims that no industry used more big data last year. Banks and insurers used to rely only on what customers and credit agencies told them, but today websites and mobile-banking apps let them get much more close and personal. Less conventional sources are also popular. Social-media profiles, web-browsing, loyalty cards and phone-location trackers can all help. In a trial, FICO, America’s main credit-scorer, found that the words someone uses in his Facebook status could help predict his creditworthiness (tip: avoid “wasted”). Even facial expressions and tone of voice are being studied for risk.
Believers say such trawling will get customers cheaper and better products. But consumer advocates accuse the industry of deliberate vagueness about its intentions. Financiers, unlike gamblers, have always used data. But most people, when they accept the terms of a new app or click away that annoying cookie message, have no idea what they give away, to whom and for what purpose. According to the European Commission’s statistics agency, Eurostat, 81% of Europeans feel they don’t wholly control their online data; 69% worry that firms may use their data for purposes other than those advertised.
Regulators are taking an interest. In September Britain’s Financial Conduct Authority said it worried that big data could price risky clients out of insurance. In May the European Banking Authority warned that the integrity of the financial sector could be at stake if insecure data use eroded trust. In December European regulators listed concerns over privacy and ethical issues. They are now consulting the industry to see if stricter rules are needed.
Data can improve predictions of whether someone will fall ill or drive into a tree. Good algorithms are faster and cheaper than underwriters. Insurers also claim that the better they know customers, the more they can help change bad habits. The industry insists more customer data mean “tailored” products: someone about to bungee jump can be warned that his life policy doesn’t cover this, and be offered an add-on. Banks can protect customers against fraud if they follow their whereabouts. These techniques can also help people outside the financial system gain access to finance. For the 64m Americans without sufficient credit history and the 2bn people around the world without a bank account, this would be good news.
But critics fear too much data-crunching could actually increase financial exclusion. The riskiest customers, and those offline, might be priced out. The more the industry relies on complex—and proprietary—algorithms, feeding machines that keep learning, the harder it will be for customers, and regulators, to untangle why they were rejected. And algorithms can be wrong. A bilingual speaker’s search-engine entries could look erratic; a social-worker’s location-tracker could imply a risky lifestyle. And since it is unclear how judgments are made, says Frederike Kaltheuner, from Privacy International, “you could get stuck in a Kafkaesque situation where you’re put in a certain box and can’t find out why, and can’t get out.”
Yet privacy is a fluid concept. A survey last year by EY, a consultancy, found that around half of digitally savvy customers were happy to share more data with their bank, if they got something back. It also depends on context. When Tesco, a British retailer, uses data from loyalty cards to offer shoppers discounts on their favourite treats, few are bothered. But use the same data to help calculate an insurance premium (as it does), and many find it creepy.
Keeping customers happy is not about what is legal, but about what they think is off-limits. People give uninformed consent to all sorts of things online. But users can feel tricked and spied on if they learn their data have been sold or used in unexpected ways. Retailers struggle with this too, but customers expect their bank to respect their privacy more, says Torsten Eistert from A.T. Kearney, a strategy firm.
Regulators have a role to play, particularly in dealing with questions of discrimination and exclusion. If using someone’s browsing history to exclude them from an offer for a cheap flight is OK, is it also reasonable to use those data to lock them out of health insurance (eg, by assuming that someone who Googles doughnut shops is a bad risk)? Now that Amazon sells loans, Alibaba has a payments business and Facebook has patented a credit-rating system, regulators should be at least as worried about non-traditional financiers and fintech startups, which sometimes escape regulation. The European General Data Protection Regulation, which comes into force next year, covers privacy issues fairly comprehensively. It should help clarify the rules on handling personal data.
Supervisors are slow, however. It is up to the industry to respond to customers’ demands well before regulators require it. New businesses that give people more control over data, such as digi.me, which lets users share data only with those they want, hold promise. If such tools help users become their own data-brokers, they may be willing to share more data with their mortgage lenders or insurers. But trust will truly be earned only if financial firms, old and new, get ahead of the game and start talking to customers about what’s really going on behind their screens.
Should our bankers and insurers be our Facebook friends?DONALD TRUMP’s health-insurance premiums could soon go up, and not just because of his love of burritos. Data-crunchers have found a link between the negativity of someone’s tweets and his risk of dying of heart disease. The education levels of your Facebook friends or the activity on your phone can help reveal how likely you are to repay a loan. Money-managers are rummaging ever more curiously through customers’ digital lives.
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