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Which topics would you most want to see researched?

> Posted by Sonja E. Kelly, Director of Research, CFI

Hi there. I would love your help as we select topics for our 2018 CFI Fellows research.

CFI is getting ready to launch the request for proposals for our 2018 Fellows cohort (a lot of you have been asking when it’s coming out, and the answer is SOON!). The CFI Fellows Program is designed to respond to questions we think are critical to the future of financial inclusion. Fellows come from many perspectives, including both relatively junior and senior well-known researchers, and including researchers who have been in the financial inclusion community for a long time and some who are perceptive outsiders. We share a set of topics for study, and ask interested researchers to submit research proposals that address the topic of their interest.

Our semi-final list of questions is long, and we ask for your help refining or prioritizing them – or adding new ones. We’ve enabled comments at the bottom of this post for your feedback. Alternatively, feel free to email me at skelly@accion.org.

Here are the questions we are currently considering:
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It’s not just social media. We need a fresh look at how financial data is protected, too.

> Posted by Elisabeth Rhyne, Managing Director, CFI

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Mark Zuckerberg defended Facebook’s handling of customer data yesterday before the U.S. Senate, and many of us at Accion and the Center for Financial Inclusion were riveted. Not that the testimony was especially compelling as television spectacle, but because the issues at stake are so important both for our own lives and for our work.

I did a quick scan of the staff here in our Washington, D.C. office, and would like to share some of their thoughts.

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> Posted by Dr. Katharine Kemp, Research Fellow, UNSW Digital Financial Services Regulation Project

The following post was originally published on the IFMR blog. 

Financial inclusion is not good in itself.

We value financial inclusion as a means to an end. We value financial inclusion because we believe it will increase the well-being, dignity and freedom of poor people and people living in remote areas, who have never had access to savings, insurance, credit and payment services.

It is therefore important to ensure that the way in which financial services are delivered to these people does not ultimately diminish their well-being, dignity and freedom. We already do this in a number of ways – for example, by ensuring providers do not make misrepresentations to consumers, or charge exploitative or hidden rates or fees. Consumers should also be protected from harms that result from data practices, which are tied to the provision of financial services.

Benefits of Big Data and Data-Driven Innovations for Financial Inclusion

“Big data” has become a fixture in any future-focused discussion. It refers to data captured in very large quantities, very rapidly, from numerous sources, where that data is of sufficient quality to be useful. The collected data is analysed, using increasingly sophisticated algorithms, in the hope of revealing new correlations and insights.

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> Posted by Elisabeth Rhyne, Managing Director, CFI

Internet privacy rules have just been overturned in the U.S. by Congress and the Administration, and at the same time, struggles over banking privacy are taking place. There are striking similarities as well as crucial differences. As a consumer protection advocate, I am struck by how the narrative about these kinds of conflicts primarily centers on where competitive advantage lies, and which company or industry is made the winner or loser, rather than about the rights of consumers.

The internet case pits telecoms and cable companies, like AT&T, Verizon and Comcast, against internet companies, like Google and Facebook. The Obama-era rules that were just overturned required broadband providers to ask customer permission before tracking, sharing and/or selling their data. These companies complain that the rules disadvantage them relative to internet-based companies, which can collect data without such rules.

The banking case, as reported in The New York Times, pits major banks against fintechs and data aggregators. The question is whether banks will transfer consumer data – at the consumer’s request – to companies that provide personal financial management tools, like Mint, Betterment, and Digit (or to data aggregators that facilitate the transfer – like Plaid and Yodlee). Without this data the financial management apps cannot build the complete portrait of a person’s financial life they need to provide analysis and advice. But banks are reluctant, even after specific consumer requests. You might think this reluctance is to protect their customers or because of data privacy rules for banking, but actually, according to The Times, it’s because the customer data reveals details about banks’ own business models – like pricing and products. The banks fear, probably correctly, that the personal financial management companies will use the information to undercut bank products with their own offerings.

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> Posted by Danielle Piskadlo, Manager, Investing in Inclusive Finance, CFI

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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.

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In the following post, John Owens offers an overview of his research project with the CFI Fellows Program.

Background & Research Questions

More and more online credit providers have started to offer loans to not only consumers but also to SMEs around the world.

Outside of digital banking platforms, new alternative online and digital platforms that target consumers and small SMEs include:

  • Peer-to-peer (P2P) SME lenders
  • Online balance sheet lenders
  • Loan aggregator portals
  • Tech and e-commerce giants
  • Mobile data-based lending models

While the rise of alternative data-based lending has opened new and innovative credit opportunities for individuals and SMEs, these new technologies and providers also come with several consumer protection challenges. These can be categorized into seven main areas:
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> Posted by Daniel Balson, Lead Specialist for Eurasia and MENA, the Smart Campaign

This is the fourth and final blog entry in a series exploring how financial services can be leveraged to assist refugee populations. This entry will consider the future of refugee financial services and what our sector can do to ensure that the future is an inclusive one that serves genuine needs and protects refugee rights.

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Syrian refugees shop at a market with their bank card given by the Turkish Red Crescent.

It is worth asking whether the financial inclusion sector is at the forefront of the movement to financially include refugees. The humanitarian sector has long struggled to determine how to provide assistance during a crisis in a way that is sustainable, effective, and accountable. Recently, humanitarian organizations such as Oxfam and the International Finance Corporation (IFC) have begun considering whether it’s possible to use payments as an on-ramp for financial inclusion of refugees. Cash transfers have historically facilitated corruption and failed to make it into the hands of the people who needed it most. In-kind donations of goods such as tents, food, sleeping material and other items undermined local merchants who made their livelihoods selling these very goods. In response, the sector has begun experimenting with digital financial payments. In Afghanistan, for example, the World Food Program (WFP) has issued e-vouchers and mobile money to cover food aid. The first e-voucher pilot was carried out on a small user base of 603 recipients in Kabul for a three-month disbursement cycle from April to June 2014. The total value of e-vouchers disbursed was US$72,360. The program proved successful and the WFP launched several follow-on pilots across the country in the subsequent year.

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> Posted by Sonja Kelly, Director, CFI

A recent Facebook promotion by a U.K. coffee shop offered,  “Like us on Facebook and get a free coffee!” This line would totally get me. Wait… all I have to do is click one little button, and I can save $2? Sign me up!

A free cup of coffee, however, was not the only thing that customers received when they liked the coffee shop’s Facebook page. They also got a very “personalized” experience, complete with the barista at the coffee shop rattling off their job, religion, birthdate, address, mother’s maiden name, and more.

Check out the video that documented the customers’ experiences here:

(My favorite part is when the barista says to the customer, “Oh, we know everything about you, Martin.”)

As part of the CFI Fellows Program one of our fellows, AJ Mowl, has been looking at some of the pros and cons of leveraging consumer data for financial inclusion. As she has relayed to me some of the basic facts about big data, I have become more and more aware of just how big big data is—and what the consequences are when I trade access to my data for services.

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> Posted by Susy Cheston, Senior Advisor, CFI

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Data analytics is a big story these days, and we’re excited about its potential. In fact, we discuss its promise in the Technology, Addressing Customer Needs, and Credit Reporting sections of the FI2020 Progress Report. In terms of credit reporting, data analytics start-ups claim that their algorithms can cull information from Internet searches, social media, mobile apps, and so on to identify creditworthy people who might otherwise be left out of the system.

GO Finance, operating in Tanzania, and Konfio, in Mexico, are online lenders whose models are based on data analytics. GO Finance leverages digital data and mobile money channels to underwrite and manage loans for small and medium-sized enterprises (SMEs), particularly targeting farmer cooperatives and others in the agricultural value chain. Konfio uses credit algorithms based on alternative data to help micro and small businesses obtain working capital loans. Konfio’s digital platform allows for low-cost customer acquisition and rapid credit assessment, enabling the company to offer lower rates. Demyst Data, by contrast, partners with financial institutions – global banks, online lenders, and card issuers. It analyzes online, social, and internal data to help its partners lend to thin-file, underbanked customers. Alibaba’s Ant Financial and its new Sesame Credit use proprietary customer data drawn from non-banking transactions to support lending, with Alibaba’s e-commerce business, financial service provider (Ant), and credit reporting service (Sesame Credit) all arms of the same conglomerate.

For data analytics to reach its enormous potential for credit reporting, there are big questions that need to be worked out. Is it really predictive? Will it really enable more customers at the base of the pyramid to obtain credit? Will customers’ rights to data privacy be protected? How can data analytics be effectively regulated?

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> Posted by Susy Cheston, Senior Advisor, CFI

Visitors to our FI2020 Progress Report on Client Protection will have noted our poor math skills. (This is the section of the report that assesses global progress to date in advancing fair treatment for lower-income financial services clients.) We rated regulators a 6 on consumer protection and providers a 3—and somehow averaged those out to a 5. Our averaging skills make even less sense when you consider the three legs of the client protection stool—providers, regulators, and consumers—and realize that consumers are not even on the radar, rightfully earning a 1 at best in terms of their capacity to advocate on their own behalf. So why the optimism?

We were certainly swayed by the impressive momentum among a range of actors at the global level—including policy and private sector initiatives—toward improved consumer protection. But it’s what happens at the national level that really counts. The World Bank’s 2014 Global Survey on Consumer Protection and Financial Literacy reports that some form of legal framework for financial consumer protection is in place in 112 out of 114 economies surveyed. We are not so Pollyannaish as to think that having a legal framework is equivalent to having a regulatory and supervisory system that protects consumers well, but we do think it’s a good step in the right direction.

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The views and opinions expressed on this blog, except where otherwise noted, are those of the authors and guest bloggers and do not necessarily reflect the views of the Center for Financial Inclusion or its affiliates.