Primer on Consumer Data Regulation

Abstract

The use of personal data by government and private service providers in interactions with individuals is becoming ubiquitous in India. These advances can greatly improve efficiency and reduce costs when delivering services to harder-to-reach users. However, the pervasive nature of data processing has raised concerns regarding privacy, exclusion due to digital service failure and related harms. These issues have special relevance for finance, given the increasing digitisation of the sector and the growing use of non-financial information to support the delivery of financial services. Without a robust framework to govern the regulation of consumer data, consumers and providers are exposed to significant risks and uncertainty. There has been significant policy movement in the past two years in reaction to some of these concerns, culminating in the release of a draft Personal Data Protection Bill that awaits introduction in the Indian Parliament. Within the financial sector, regulatory bodies have flagged relevant issues in the final report of the Inter-Regulatory Working Group on FinTech and Digital Banking, including those relating to consumer data protection, organisational data, shared utilities, big data analytics, data security and fraud prevention. In this background, some permanent concerns arise with respect to the regulation and use of consumer data in finance. Regulators and providers need to address the need to build trust for consumers on digital platforms given fears of fraud or financial loss. Providers have access to vast personal databases. In the absence of robust data protection regulations, provider considerations on the processing of data and the potential of system failures are crucial. Cost-efficient digital financial processes must not be created at the price of compromised consumer protection. A future regulation for data protection must be able to identify the unique risks Indian consumers might face while keeping in mind the potential of digital finance to promote financial inclusion.