The Facebook data crisis needs a measured response. With banks trying to turn themselves into tech platforms, any new rules imposed on the tech firms will apply to them too, writes Brian Caplen.
Facebook is hitting the headlines for all the wrong reasons. The way data has been obtained from the social media site and then used for political campaigning has caused huge consternation at the highest levels of government.
The so called Faang stocks (Facebook, Amazon, Apple, Netflix and Google) have taken a beating as investors analyse the impact to business models. There are calls for massive regulation of the tech giants and in Europe there are moves for a digital tax.
As data is the new oil and the tech giants have grown hugely powerful in a laissez faire environment, it is hardly surprising that some new thinking is necessary. But any response needs to be measured and should restrain excesses rather than regulating the tech companies out of existence.
For all the cries of foul about the use of social media data for targeting political messages, the profiling of potential consumers and voters to persuade them to buy or cast their ballot in a specific way is what advertising companies and political parties have been attempting for decades. The new part is the scale and the accuracy of the targeting (although how much that translates into specific outcomes is still in doubt) and the extent to which the data is being obtained without the full knowledge and consent of the owner.
The implicit bargain offered by sites such as Facebook and Google is that users provide their personal data in return for free use of the platform. Despite the furore over the de facto advertising agency Cambridge Analytica’s use of the data and resulting Facebook campaign, it is unclear how many users feel strongly enough about the issue to actually forego the benefits of keeping in touch with friends and family by leaving the site.
A measured response by regulators would definitely involve making that implicit bargain explicit and making it clear and easy as to how a user can delete their data and leave the site. There also needs to be a better system for authenticating news sources and removing inappropriate content.
But what should be avoided is the scale of regulation that makes the business model or parts of it unviable. This criticism can be levied at the parts of the post-crisis banking regulation that led to banks quitting some essential risk-based activities such as correspondent banking in frontier markets and project finance lending.
Bearing down on social media is not going to restore the fortunes of the print media that some might like and bring back the old world. A measured response involves laying down some ground rules that enhance but do not undermine this new business model that banks are trying so hard to emulate.
Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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