City watchdog in big data probe

City watchdog opens big data probeThe Financial Conduct Authority is to launch an investigation into how insurance firms are adopting big data analytics as part of a wider review aimed at protecting consumers as well as driving innovation.
The move was revealed in the regulator’s “2015/16 Business Plan” report, which exposes the risks for consumers as the pace of technological change quickens across the entire financial sector.
Financial services firms have jumped on the big data bandwagon with avengence, with car insurance companies gathering reams of data through the use of telematics and the like, while social media tracking is also widespread.
FCA chief executive Martin Wheatley said that the watchdog would continue to monitor the growing use of digital technology to investigate how insurance firms use web analytics, behavioural tools and social media analysis to gain insight into increasingly large volumes of data.
“We will identify potential risks and benefits for consumers, including whether the use of big data creates barriers to access products or services,” the report states. “We will also examine the regulatory regime to ensure that it does not unduly constrain beneficial innovation in this area.”
The FCA admitted that the speed on digital innovation threatens to outstrip its ability to create and apply regulations in order to protect consumers, while at the same time supporting the creation of new services and increasing competition.
“Widespread adoption of innovative technologies across a range of firms – from large retail banks and insurers to challenger banks and new startups – may present benefits to consumers, but can also increase the risk of harm to customers and market integrity if the pace and complexity of digital transformation is not effectively managed,” the report stated.
It also revealed growing concerns that new technologies could enable firms to present information “in such a way as to encourage poor choices, possibly resulting in mis-selling”.
The complex and often out-dated systems used by the big banks, for example, continue to create the risk of data breaches, threatening to undermine customer trust in the market which could cause a “market integrity issue” if not solved.
The investigation findings are set to be published in the first half of next year.

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4 Comments on "City watchdog in big data probe"

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