Towards the end of 2016, under their remit to monitor emerging risks for consumers and financial institutions, the Joint Committee of the European Supervisory Authorities (the ESAs) sought feedback to a Discussion Paper on the use of “big data” by financial institutions. See our January 2017 update. They have now issued their final report, which concludes that any legislative intervention at this point would be premature, given that existing legislation should mitigate many of the risks identified.
The ESAs define big data as the collection, processing and use of high volumes of different types of data from various sources, using IT tools, in order to generate ideas and solutions or to predict certain events or behaviours. They observe the increase in the use of big data, albeit to varying extents across the sectors and across the EU. They recognise that its use could transform the way products and services are provided, which could provide benefits for consumers and financial institutions.
However, there are attendant risks. The potential for errors could lead to incorrect decisions taken by financial services providers, for example, and the increasing segmentation of the customer base is influencing market and product access. The ESAs note that consumers should be made aware of the risks.
Taken into account the benefits and the risks associated with the use of big data, the ESAs have concluded that any legislative intervention at this point would be premature. They note that existing legislation should mitigate many of the risks identified. They will, however, continue to monitor developments and invite financial firms to develop and implement good practices on the use of big data.