The increasingly-pervasive use of personal data in the provision of financial services can enable providers to offer suitable financial products, at a scale. Internationally, suitability or appropriateness in finance is conceptualised as “the degree to which the product or service offered by the intermediary matches the retail client’s financial situation, investment objectives, level of risk tolerance, financial need, knowledge and experience” (Basel Committee on Banking Supervision, 2008).
A suitability-based approach to financial services provision places obligations on providers to make assessments of whether a product is suitable prior to the sale to a consumer. Practitioners have often asserted that this is challenging to implement because of the costs of granular suitability assessments and the absence of the detailed consumer information needed for them. With the growing use of personal information and analytics in the provision of financial services, that challenge appears solvable. The potential for data-driven providers to undertake suitability assessments, offer personalised financial advice and even customised products, are recognised as opportunities of data-driven financial services.
These new techniques, however, raise a new set of issues for consideration. Inappropriate use of personal information such as for predatory targeting of users could create new consumer harms. Moreover, suitability frameworks may also need to be updated for the digital interface, which may inadvertently influence users’ choices. Moreover, advise is now integrated across a digital interface, blurring the distinction between sale and advise of financial products even further.
In this background, we have compiled a primer on the suitability for consumer data use and product design. The primer emphasises the ways in which the use of personal data can deepen the provision of suitable finance. It also revisits the need for new suitability frameworks for providers and identifies some considerations which emerge for regulators operating in the digital financial space.
Click here to access the primer on Suitability for Consumer Data Use and Product Design.
(This primer is created to support the discussions of the panel on suitability for consumer data use and product design at the 4th Dvara Research Conference on Regulating Data-driven Finance. The discussants for the panel include Dr Janaki Srinivasan (IIIT-Bangalore), Mr Satish Pillai (TransUnion), Ms Buhle Goslar (JUMO), Mr Sanjay Jain (CIIE) and Mr Greg Chen (CGAP).
The primers for the conference are designed to give sufficient context to the discussions and provoke further conversation, rather than act as stand-alone research notes. The full agenda for the conference is available here. Read more about the research themes and motivations for the conference here. Following completion of the conference, proceedings and related documents will be available here.)
