The Joint Committee of the European Supervisory Authorities (ESAs) published its final report on big data analyzing its impact on consumers and financial firms. Overall, ESAs have found that while the development of big data poses some potential risks to financial consumers, the benefits of this innovation currently outweigh these. Many of the risks identified by the ESAs are mitigated by existing legislation.
The report concludes that big data brings many benefits for the financial industry and consumers, such as more tailored products and services, improved fraud analytics, or enhanced efficiency of organizational internal procedures. On the other hand, financial consumers should be made particularly aware of some of the risks posed by big data.
The risks identified by the ESAs include the potential for errors in big data tools, which may lead to incorrect decisions being taken by financial service providers. Additionally, the increasing level of segmentation of customers, enabled by big data, may potentially influence the access and availability of certain financial services or products.
Weighing both the benefits and the risks associated with this innovation, the ESAs have concluded that any legislative intervention at this point would be premature, considering that the existing legislation should mitigate many of the risks identified. The ESAs will continue to monitor any developments in this area in the coming years and invite financial firms to develop and implement good practices on the use of big data. The report results from a consultation conducted between December 2016 and March 2017.
The objectives of the report were to:
(i) map the big data phenomenon and assess its potential benefits and risks;
(ii) raise awareness among consumers of their rights set in existing financial legislation and in other relevant areas; and
(iii) raise awareness of financial institutions of their obligations set in existing financial legislation and encourage the adaptation of good practices on big data.
The Joint Committee is a forum with the objective of strengthening cooperation between the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA), collectively known as the three European Supervisory Authorities (ESAs).