Protecting Financial Consumer Data in Developing Countries: An Alternative to the Flawed Consent Model

Abstract

“Big data” analytics and other data-driven innovations have recently been promoted as important tools for advancing digital financial inclusion in developing countries, permitting financial services providers to offer credit to consumers without a formal credit history and design products which meet local consumers’ needs. However, these new data practices also create significant risks, including data theft, fraud, and potentially financial exclusion. Nonetheless, many providers and standard-setting bodies consider that data practices can be justified if consumers provide their informed consent to the relevant collection, use, sharing, and storage of their data.

We argue that this traditional “informed consent” model for consumer data protection has real weaknesses in effectively protecting the privacy of consumers in developing countries.

This model may make services more accessible but also significantly increases the likelihood of private information being exposed. We propose an alternative approach to financial consumer data protection, which takes account of the modern dynamics of digital data collection, use, sharing and storage, and the limitations of consumers individually negotiating acceptable levels of data protection. This alternative approach would be for regulators, industry and scholars to: recognize that the problem of consumer data protection is not solved by consumers supposedly providing consent to data practices; reframe the discourse to avoid euphemisms and assumptions which unjustifiably favor provider interests; recognize that data protection and innovation need not be a zero-sum game; and more broadly, challenge the validity of the dominant “privacy self-management” paradigm in the context of developing countries.

Keywords: financial inclusion, developing countries, informed consent, digital data collection, consumer data protection, data protection