Smile and Accept the Inevitable

Data privacy: we hardly knew ye.

Data privacy is officially dead. The U.S. House of Representatives’ vote to overturn the Federal Communications Commission’s (FCC) internet privacy rules was yet another nail in the coffin, making data privacy a thing of the past.

In previous generations, banking may have been based on personal relationships and a handshake. More recently, it was based on your banking history and financial flows. But for future generations, access to financial products and services will almost undoubtedly be decided by big data algorithms, gobbling-up whatever digitized information, financial or otherwise, the corporate tentacles can seize.

We know what you’re thinking. Won’t this help underwrite previously-underbanked individuals? Of course. And what does data-sharing matter so long as you don’t have anything to hide? Won’t ultra-targeted ads make the consumer experience better? All definitely true. Well, actually there are inherent problems with these lines of thinking, but honestly what’s the point of resisting? The notion of being “data rich” has never been more powerful. And what are negative social externalities in 2017? After all, the U.S. political system breathed new life into the fallacy of “clean coal” earlier this week in the name of making a few bucks.

Given this approaching reality, facts, alternative facts, and all, the financial inclusion industry needs to get with the program. These are the rules. We need to get better at playing the game. First order of business? Perhaps the biggest opportunity is working to build the profiles of what is currently a very digitally thin-file client segment: children.

We know that bringing youth into the financial fold early on is critical to achieving our mission of a fully financially inclusive world. Building financial capability at a young age helps to cement a strong money management foundation. Even before our digital alter was hardwired, we knew that it was important for children to start building their financial profiles early. And for their part, children make great borrowers. Why else would credit card companies so vigorously target first year college students?

I believe, with the proper parental permissions, there are currently missed opportunities in children having minimal digital footprints and in financial service providers (FSPs) not better mining and analyzing the online behavior of children to better meet their financial needs, now, or when the time comes.

For instance, by tracking the (limited, I swear) time my 3 year old spends on our iPad, FSPs would see from the YouTube videos he selects that he will someday be a hockey player and will therefore need excellent dental insurance. When my 1 year old wakes at 2am and manages to wrestle our phones from us, after awkwardly “liking” a few Facebook posts, he inevitably starts calling our work contacts. Making work calls at 2am? That type of work ethic should position him well for an entrepreneurial small business loan. And for that matter, what about targeted financial products and services for our pup? He is only 5 years old but, in dog years, an FSP should be talking to him soon about retirement products. Though I guess he isn’t doing himself any favors in choosing to play with balls and Frisbees instead of with tablets and laptops.

In any case, parents should embrace the fact that data privacy is no more and focus on building up the amount of data available to FSPs about their children. And possibly pets! FSPs and other industry stakeholders, we need to embrace this critical client segment and start vying for their data. Everyone else… have a happy April’s Fools Day!

Of course the Center for Financial Inclusion won’t roll over and accept consumer harms – in whatever form, however shiny and futuristic, they may be. To this end, stay tuned for an upcoming blog post from CFI Director Elisabeth Rhyne examining and comparing data privacy in both the banking and internet provider industries.

Have you read?

The Data Story in the FI2020 Progress Report on Credit Reporting

Helping Consumers Understand Their Digital Data: Initial Experiences from Tanzania

Is Bigger [Data] Better?



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