Can Rapid Innovation Adoption and Data Privacy Co-Exist?

January 5, 2017     By : Elena Mesropyan

A data-driven approach to decision-making and evaluation of opportunities has well-served businesses since advanced data analytics solutions invaded national markets. But when it comes to hazardous consequences of data access by improper parties, the question of balance between open gates for innovation adoption and personal security becomes especially critical.

It’s difficult to be definitive in the matter, but it appears that innovation adoption (in the US especially) fed largely on diminishing data privacy borders. In that regard, US is one of the most ‘progressive’ markets in terms of data transparency and data back-and-forth among parties – banks, the startup community, large technology companies, telcos, e-commerce and social media companies.

Whether it can be considered as something progressive at all, in the US, data privacy became a unicorn – it’s a mythical creature everyone is looking to protect to a reasonable extent in Silicon Valley and beyond. And while the actual mythical creature never existed, data privacy in the US was practically extinguished over the course of past few years.

In fact, most companies handling any sort of data to power its product/service improvement have been rather aggressive in getting hands into private financial data, creating a controversy among market participants. More importantly, it appears that in the US, only one side – the traditional banking sector – is arguing for greater protection of customer data. Bank of America, Wells Fargo, JPMorgan – large financial institutions at some point have been using the ‘data privacy’ card to fight off tech-powered rivals.

The efforts, however, do not appear to be bearing results – technology companies and telcos in the US, on the contrary, do seem to favor ‘no privacy’ approach in their development strategies. Earlier, we looked at such contradictory examples as Facebook, Google and Verizon/AOL. Back in 2014, the social media giant announced that it will target ads based on the browsing histories of its users: every page that a user visits, which has the “Like” button, sends data back to Facebook regardless of whether people ‘liked’ it or not. Given the scale of the user base, the scale of business presence and ever-expanding Facebook family apps, platform capabilities and acquired companies, the precision is almost scary.

With Google, things go even further – in August 2016, Northeastern University’s professor Guevara Noubir and his colleagues have demonstrated that Android apps can be manipulated to reach inside user’s mobile phone to track person’s whereabouts and traffic patterns, all without user’s knowledge or consent. But even that is not as meaningful as something happened behind curtains during the summer of 2016 when Google quietly dropped the ban on personally identifiable web tracking.

Even before these events, back in 2011, the National Bureau of Economic Research (NBER)  expressed concerns over the emerging controversy, emphasizing that never before have firms been able to observe consumer actions on such a detailed level or obtain such potentially personal information. Such capabilities have generated the possibility of an inherent tension between innovations that rely on the use of data and the protection of consumer privacy.

The organization points out the fine line between intrusive technology and innovation-supportive move in data analytics. Innovations in digitizing health information, for example, lead to quality improvements in the health sector, because they make patient information easy to access and to share. However, easy access and portability raise privacy concerns because consumers want sensitive data to be seen only by pertinent health care providers.

In the financial services industry, access to personal data practically created whole segments – PFM platforms, automated investments tools, robo-advisors, etc. A vibrant ecosystem of those services has significantly transformed consumer perception of personal financial management and financial habits, which, to be fair, is a positive implication.

Professionals argue that from the FinTech sector’s perspective, restriction of access to personal data is a significant obstacle. “After all, many innovative FinTech’s are built on their ability to generate actionable insight from data – so any regulation that restricts access to or exploitation of that data might be seen as a setback.”

The question of finding a balance matters across verticals – commerce, healthcare, advertising, financial services, etc. Access to data significantly benefits the end-result, the quality of the service and its relevance to the customer. On the other hand, the more parties share sensitive data, the more links there are to test for proper security measures.

More importantly, the question of the coexistence of data privacy and wide adoption of advanced technologies such as blockchain is very debatable. Blockchain’s inalterability can raise issues for individuals who wish to protect their privacy (including as regards the nascent and evolving “right to be forgotten,” which is recognized in some jurisdictions), as some professionals point out.

“Changes in people’s lives could trigger this individual need for an alteration of the information stored in blockchain ledgers, such as insolvency, criminal records, change of name, change of gender, etc. As such, given the decentralized nature of blockchain, how could a court order a change in blockchain the same way it would order a web page to disappear from Google search results?” – The question seems very legitimate now more than ever.

Fueled largely by the possible imbalance in ensuring data privacy and supporting innovation adoption, experts suggest that there is a growing movement around the world to start sensitizing the consumer on the commercial importance of their personal data; taking it a step further, to help individuals directly manage their personal data, and subsequently, monetize third-party access to their personal data.

Elena Mesropyan
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Elena Mesropyan

Global Head of Content at Let's Talk Payments
Elena is a research professional with a background in social sciences and extensive experience in consumer behavior studies and marketing analytics. She is passionate about technologies enabling financial inclusion for underprivileged and vulnerable groups of the population around the world.
Elena Mesropyan
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