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Data Minimization: The growing need to minimize consumer financial data, in 4 charts

  • 87% of consumers think data minimization should be done but only 41% believe that it is happening
  • Consumer’s opinions stand united across party lines.
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Data Minimization: The growing need to minimize consumer financial data, in 4 charts

Over the past few years, data has been likened to multiple natural resources like oil and gold. However, unlike oil and gold, data (particularly Big Data) is quite new and poorly understood. Its novelty and sheer volume pose complex questions around ownership and privacy in the digital world and continue to confound consumers, regulators, FIs, and data aggregators alike.

A report by the Financial Health Network sheds light on how consumers understand and feel about existing practices in the financial data ecosystem. Increasingly data is becoming the key determinant of how we experience the online and offline world. I don't know how useful comparing data to gold or oil is for those who produce it (consumers) but it does betray how valuable data can prove to be for those who have loads of it.

The question is if consumers really understand the depth of what is known about their financial activities and moreover, are they okay with it?

1) The question of should:

Source: Financial Health Network, Consumer Data Rights Report, Page 14, 2021

The FHN report shows that most consumers (87%) would prefer that fintech apps access “only the data they need”. This conservative approach to consumer data access and storage is called Data Minimization.  Only accessing strictly necessary information about consumers not only discourages excessive data collection but also prohibits organizations from holding onto data indefinitely. The recent bi-partisan proposal “American Data Privacy and Protection Act'' doubles down on Data Minimization and ‘privacy by design’. It describes Data Minimization as “a covered entity shall not collect, process, or transfer covered data beyond what is reasonably necessary, proportionate”. While these terms are not clearly defined in the proposal, it still shows that the time when Bezos could say “we never throw away data '' is definitely in the past.

2) What is happening right now: 

Source: Financial Health Network, Consumer Data Rights Report, Page 14, 2021

These responses show that consumers are not only aware of the importance of Data Minimization but also think that in practice, it is often absent. The fact that 34% of all consumers “don’t know” how much of their data is being accessed illustrates that fintechs and PFIs (Primary Financial Institutions)  have so far failed to adequately inform and educate their consumers about their data practices. 

3) I’m not reading all of that:

Source: Financial Health Network, Consumer Data Rights Report, Page 17, 2021

The chart above may hold the answer to why 34% of consumers didn’t know how much data is collected about them: most information pertaining to data collection is found in privacy policies, which often go unread or are poorly understood. While the survey does not investigate how well consumers understood the privacy policies they did read, one regular criticism of such policies is their heavy use of jargon and technical language, which complicates their content for the average consumer. These statistics point out that despite their popularity amongst fintech/tech/PFIs, privacy policies are not an effective channel of communicating data practices. 

4) Bi-partisan approval:

Source: Financial Health Network, Consumer Data Rights Report, Page 18, 2021

Consumers across the board prefer to have control over what data is shared about them, when it is shared, and how much. Unlike gold and oil, data is not found naturally lingering in our (digital) environment – it is generated from consumer activity, interest, and interactions. Claiming that data is similar to natural resources like gold and oil, initiates the process of “naturalizing” a digital artifact. According to Critical Technology Theorists like Nick Couldry, this can begin a process by which extractive/excessive data collection seems no more sinister than mining a piece of land for gold. When in reality data isn't nearly as ambient or non-reactive like gold and oil, it is a direct, sometimes real time representation of human activity and therefore its misuse has direct, real time and real world consequences. 

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