A ‘data commons’ holding aggregated, anonymised financial data should be established in the UK, according to a new report by London-headquartered think tank, the Institute for Public Policy Research (IPPR).
The report – Not Cashless, But Less Cash: Economic Justice and the Future of UK Payments – recommends that anonymised personal banking and financial services data should be held in new public data trusts: legal structures providing independent stewardship of data. It says this would boost competition, promote innovation and “prevent monopolistic tech giants dominating the market”.
The paper moots a new Office for the Digital Commons that could “work to combine existing regulatory platforms in order to level the playing field on data access, and should work closely with regulators to ensure competition where entry to personal finance markets could lead to excessive competitive advantage”.
The report says that financial service providers – including tech giants that have entered financial services – should be required to submit their anonymised, aggregated data securely to ‘Digital Britain’: a public service through which access to data trusts can be shared across government, the public and innovators. The IPPR has previously referred to the potential of a ‘Digital Britain’ public service in a report entitled ‘The Digital Commonwealth’ published in September 2018.
The IPPR’s recommendation follows examinations into data trusts as a potential approach to increasing citizen trust in digital financial services and improving access to data. Notable examples include a 2017 independent review of AI for the UK government, and research undertaken in 2018 by the Open Data Institute, the Office for Artificial Intelligence (AI) and non-departmental public body Innovate UK.
Protection against automated bias
The IPPR’s paper also focuses on the need to protect against the risk of bias in automated decision-making. It says that digitalisation “risks entrenching existing inequalities where automated financial decision-making replicates human biases on an unprecedented scale” and says action is required “to protect against data-driven discrimination in financial services where discriminatory outcomes are identified”.
The paper’s authors recommend regulatory powers for the UK’s recently launched Centre for Data Ethics and Innovation to “inspect audit trails in order to assess how anti-discrimination measures have been built in from design stage”.
Other policy recommendations outlined in the report include the imposition of a ‘Digital Transition Levy’ to fund digital inclusion schemes; business rate rebates for operators that provide free-to-use ATMs; and a government-developed digital platform for self-employed workers, enabling them to better manage payments and tax accounting and to apply for social security provision.
Lessons for policymakers worldwide
The IPPR report’s overall theme is that while an increasingly digital economy brings advantages, if these benefits are only available to the digitally savvy – typically younger people and those with higher incomes – inequality could be embedded into the future of finance.
The 60-page report is published as cash use continues to decline in the UK – just 28% of UK consumer payments were made in cash in 2018, a fall from 60% in 2008. The IPPR warns that “there is a significant risk that people and areas reliant on cash may be excluded” as cash usage further shrinks.
Global Government Forum reported last summer on the then-chair of the Treasury Select Committee’s calls for the urgent implementation of measures outlined in the Access to Cash Review to ensure that the move towards digital payments leaves nobody behind.
The high-profile report, published in March last year, concluded that about eight million adults – 17% of the UK population – “would struggle to cope” in a cashless society.
IPPR economic analyst Rachel Statham, the IPPR report’s lead author, told Global Government Forum: “While the UK is moving away from cash faster than most other comparable economies, this research offers lessons for policymakers across the globe grappling with the transition towards a more digital economy. How we unlock the power of data for public good, strengthen regulation to promote greater competition in payments markets, or foster the development of more digital services that work for everyone are challenges on a global scale. Solutions that can shape a fairer digital future will require international co-operation and co-ordination alongside leadership from individual governments.”
Governments worldwide are striving to keep pace with the shift towards digital finance. For example, Global Government Forum reported in October that the Netherlands Authority for Consumers and Markets had launched an investigation into the role of big tech firms in the Dutch payments market.
In the US, meanwhile, two cities, Philadelphia and San Francisco, have banned cashless businesses in the last year, while a fortnight ago New York City Council voted to do so. The bill needs approval by New York City mayor Bill De Blasio before it can be implemented.
