There is scope for banks to make deals with customers over the use of their data, writes Brian Caplen. But some campaigners want to ban the giving up of personal data altogether.
Banks see huge opportunities in data to better track their customers’ needs and target them with appropriate products. Some of this data they already have and some of it they would like to get hold of. They would especially like to have the data that the tech companies have and many bankers complain that open banking only takes data in one direction: from bank to tech company and not the other way around.
Then there is the question about whether personal data should be paid for, especially in the light of the Cambridge Analytica scandal in which Facebook sold data to the political consulting firm.
Superficially, the idea of rewarding consumers for their data seems attractive but, in reality, the value of an individual’s data is quite small (it is the mass of data that is valuable) meaning that payments would be meagre.
Most people have already given away their data to Facebook and other social media outlets for free and in exchange for using the networking service. Despite the Cambridge Analytica scandal, it seems that most users are happy with this bargain.
This is likely to work in a similar way for banks that can manage the process successfully. The bargain is that the bank gets the customers' data and the customer gets better targeted, better designed and cheaper products.
But even this kind of arrangement could fail to materialise if some privacy campaigners get their way. Their argument is that data is a human right and there should be legislation to prevent an individual from breaching their own human rights. In other words, I am not smart enough to make any decisions over my data and will be breaking the law even if I willingly part with it.
In this scenario, the whole data economy would be severely impaired, allowing countries with a more liberal environment such as China to forge ahead while leaving highly restrictive countries to fall behind. Like everything, models of data privacy need to be considered and moderate. Only that way can the full potential of the data economy be realised. Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen
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