There is an urgent need for an ethical framework for the use of big data or there is a risk of undermining the social purpose of financial services according to ICAEW
The institute is calling for businesses, consumers and regulators to work together to protect vulnerable people from being exploited as a result of advances in technology.
The growing use of big data (which includes data from social media, video watching habits, location data and photos to satellite images, traffic flows and data from smart devices) and artificial intelligence (AI) is increasingly changing financial products like credit cards and insurance policies – as well as the business models of the companies that provide them.
It warns the changes will produce both winners and losers, and says banks, insurers and other financial services providers need to start managing these tensions now, before products and services spiral away from their true social purpose.
Without an ethical approach to using big data, people could be unfairly or illegally excluded from vital financial services, leaving them without access to insurance or credit, owing to factors they cannot control like gender, ethnicity, where they live, or health conditions. This will also be influenced by factors like where they shop, whether they use cash instead of cards and other information.
These new sources of data, and the ever-growing ability to process them also opens customers up to exploitation. This could include targeting people when they are more vulnerable or offering inducements to increase spending through exploiting behavioural biases.
These advances in technology come at a time when one in six borrowers are in financial distress and many consumers are in difficulties, despite good economic headlines on low unemployment. Philippa Kelly, ICAEW head of financial services, said: ‘The array of ways we can now invest, borrow and spend money makes things more complex for people and the potential harm to consumers is greater. The ethics of using data and AI in ways that might be optimal for a business but harmful for consumers need to be front and centre.
‘ICAEW’s ethical framework will help make sure banks, insurers and other financial services providers don’t take unfair advantage of this information, and it is used for designing more tailored and suitable products to meet consumers’ needs.’
Kelly pointed out that there are also opportunities to use this information for good. Recent examples include banks using big data to help problem gamblers by allowing them to block gambling sites, while the government is asking online payment providers to help combat university cheating by stopping people from buying essays online.
‘But this could be a dangerous road. If society wants banks to control how people spend their money for moral reasons beyond the law, then they need a clear remit and there needs to be a wider ethical framework for doing so,’ she said.
ICAEW has started to build an online hub with case studies and principles for using big data ethically to support debate about the issues.
Report by Pat Sweet