Personal Data Privacy – The Sacrificial Lamb in This Era of Big Data?

July 19, 2018

Data is at the heart of what most technologycompanies do. Netflix uses data to recommend movies and TV series thatconsumers will likely watch, and like. Facebook uses data to recommend productsthat users will likely like and buy. CredoLab uses data to create tailor-madescorecards that help financial institutions extend loans to consumers who areexcluded from traditional financial systems and in need of credit.  

Among the financially excluded could lie a youngstudent in need of a university loan, an immigrant seeking to grow his smallbusiness, or an industrious, trustworthy individual in need of cash to tide himover a difficult patch. These underbanked and underserved, if left unintegratedin the traditional financial system, are left at the bottom of the credit pileand remain socio-economically disadvantaged.

Extracting and processing data is not a problem perse. The problem arises when data is misused; when customers are unaware of the datathat has been extracted without their consent, and when the insights produceddo not deliver real value to them as consumers, but are only of value to thecompany.

The problem is further exacerbated when personaldata is extracted and not properly protected. In September 2017, Equifax (oneof the three major consumer credit reporting agencies in the U.S.) revealedthat hackers had gained access to company data, potentially compromising sensitive,personal information of some 143 million American consumers. Thebreach exposed sensitive data, including social security numbers and drivers’license numbers. In May 2018, aprison technology company used by law enforcement agencies across the U.S., allegedlyhad its data breached by a hacker who was able to access the livelocations of the entire American population.

Anonymousdata is meaningless until used to predict consumer behavioural trends

A data compromise in any form could mean colossaldamage to a data-driven business. But what if you used ‘metadata’instead of non-anonymous data? Information about other data does not include personalidentification details, such as the borrower’s name, ID number, date of birth,race, nationality etc., and is extracted from the smartphones of borrowers completelyanonymously.

Metadata only becomes useful when technology is usedto turn this data into meaningful, highly predictive, behavioural insights. Forexample, by using proprietary technology to extract and analyse this metadata, wecan help lenders better predict a customer’s risk profile and repaymentbehavior.

For example, we may access information abouta digital image but we won’t see the actual picture. The metadataprocessed may include the description of how large the picture is, the color depth,image resolution, when the image was created, or even the shutter speed. Atext document's metadata may contain information about how long the document isand when it was written. Metadata within web pages may also containdescriptions of page content, as well as key words linked to the content.However, without any context or point of reference, it is almost impossibleto identify metadata just by looking at it.

A further illustration can be see through thisexample. Imagine that you have a database containing 13-digit long numberstrings. These strings could be the result of calculations or a list of numbersto plug into an equation. In other words, without  any context, the numbers themselves can beperceived as the data. However, if it is known that this database is a log of abook collection, those 13-digit numbers may now be identified as InternationalStandard Book Numbers (ISBNs) – information that refers to the book, not informationwithin the book.

Anonymousbut data protection still critical

The lenders and card issuerswe work with have the option to extract either anonymous or non-anonymous data.However, given the increasing incidence of data exploitation and violation weare seeing today, many often and intentionally opt for the former. The solutionto the misuse of data is not to completely phase out the use of data as this wouldbe unthinkable. The solution to this lies in ensuring we use this data to dowhat we set out to do from the outset - to bank the unbanked and serve theunderserved.

Our main goal is to improve the standards of livingfor people and for businesses that have poor or even no access to mainstreamfinancial services. The beauty of living in an era of advanced technology andbig data means that almost every other person around you owns a smartphone.Companies like CredoLab leverage smartphone technology to turn anonymous data intohighly-predictive insights of consumer repayment behavior that go beyond therealms of traditional credit scoring.

The result? New customer segments and morecost-effective credit decisions for financial institutions and lenders, and higherlikelihoods of consumers receiving much-needed credit. All of this can be achievedwithout any infringements on data privacy or security. If done right, it can bea win-win for all.