| The FSUG publishes a paper on Big Data and financial services |
Assessment of current and future impact of Big Data on Financial Services
Introduction
A common criticism about regulation is that it always lags behind innovations and is obsolete by the time it comes into law. This paper is an attempt at exploring potential future challenges brought about by Big Data on financial services and reflect on policies to ensure that consumers do not suffer any detriment. It is always difficult to predict what the future will hold. Some of the issues discussed in this paper are already happening as we speak, others are more or less likely to happen. Fortunately, much of the technology that may have a deep impact on financial services already exists and is currently undergoing a revolution in its own right. The three main areas which will be or interest to this paper are:
- Big Data: the increased availability and size of data about users, some being proactively user generated and uploaded, some being generated by logging their behaviour.
- The Internet of Things: sensors and connected devices will surround users more and more. The smartphone was one of the first “Internet of Things” device, but with home appliances and wearables, the number of “things” collecting data about users will greatly increase.
- Artificial Intelligence and Algorithms: in order to process these extreme quantities of data and analyse them in a meaningful way, a parallel advance in algorithms and artificial intelligence will be necessary. Future algorithms will be able to identify “patterns” of behaviours across billions of data entries and even across different databases. With progress in deep learning, machines will be able to create and improve their own algorithms to analyse data, pushing even further the boundaries of predictability of human behaviour.
In theory, one of the effect of these three revolutions, combined, is a frighteningly accurate “predictability” of future behavior of any user, and thus, of future risk. In practice, very few studies have looked specifically at the impact of Big Data on financial services, but the evidence so far does not always reflect the theory of increasingly accurate predictability. The National Consumer Law Center in the US for instance, has published a report on Big Data and scoring of consumer credit risk. The report concludes that far from delivering on its promises of enabling underserved consumers access to credit, expanding data points increased inaccuracies which in turn had consequences on access to credit.
Of course, the Big Data revolution has many other potential impacts which we will explore throughout the paper. |
| ID: |
49041 |
| Author(s): |
SCR |
| Publication date: |
13/07/16 |
|
|
|
|
| | |
Created: 13/07/16. Last changed: 13/07/16.
Information concerning property and copy right of the content will be given by the Institut For Financial Services (IFF) on demand. A lack of explicit information on this web site does not imply any right for free usage of any content. |
