Financial regulators to scrutinise use of big data next year

JCESA to make sure that consumers are protected and that financial firms fulfil their obligations

Financial regulators will look into the use of big data by financial institutions in a bid to prioritise consumer protection, according to a new document from the Joint Committee of the European Supervisory Authorities (JCESA).

JCESA is made up of the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority.

In its 2016 work programme, it said it would look into the use of big data - or the analysis of data by financial firms.

"A new area of the financial innovation work will focus on the opportunities and challenges related to the use of 'big data', as well as personal data, by financial institutions to profile consumers, identify patterns of consumption and make targeted offers, which raises questions about firms' expected behaviours in order to comply with their overarching obligations," JCESA said.

"The topic aims to analyse the adequacy of sectoral regulatory frameworks and identify any regulatory and/or supervisory measures which may need to be taken."

In the UK, financial regulator the Financial Conduct Authority has said it would conduct a study into the use of big data by insurance companies.

"We will conduct a market study to investigate how insurance firms use big data, such as web analytics and behavioural data tools (including the increasing use of social media) as well as other unconventional data sources," the FCA said in its business plan for 2015/16.

"We will identify potential risks and benefits for consumers, including whether the use of big data creates barriers to access products or services. We will also examine the regulatory regime to ensure that it does not unduly constrain beneficial innovation in this area," it added.

One of the conclusions to come out of a Computing and Talend roundtable last year on "big data and analytics challenges in the insurance sector" was that the insurance sector must be mindful of how it uses big data while remaining ethical, with many of the insurers unsure how far to push with data mining.

"Perhaps what's important here is how the data is going to be consumed, and in that part there are questions surrounding analysis of those pieces of data: how the data is integrated, how the data is shared and what is it that you want to build? Do you want to make all the data available?" asked a representative of BNP Paribas PSC, who didn't wish to be named.

"In the NHS, do you want to make all the data available? Perhaps if I had had cancer that would change how insurance brokers see what my risk factors are. So given that the business on the insurance side is based on those types of data, I think that it has very big complexities," he said.