We urgently need an ethical framework for the use of big data or we risk undermining the social purpose of financial services, according to ICAEW. The accountancy and finance body is calling for businesses, consumers and regulators to work together to protect vulnerable people from being exploited by the growing use of data and artificial intelligence (AI).
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 AI is increasingly changing financial products like credit cards and insurance policies – as well as the business models of the companies that provide them.
There will be winners and losers as a result of these changes. 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're more vulnerable or offering inducements to increase spending through exploiting behavioural biases.
Philippa Kelly, ICAEW Head of Financial Services, said: "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."
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 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."
However, there are also opportunities to use this information for good. Philippa said: "on the other hand, the ability to better use data means that, for example, we have already seen banks help problem gamblers by allowing them to block gambling sites, and 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."
ICAEW has started to build an online hub with case studies and principles which can be accessed here: https://www.icaew.com/technical/financial-services/inspiring-confidence-in-financial-services/ethical-use-of-big-data-in-financial-services