A holistic approach to data in the digital age

Businesses around the world are engaged in a digital data gold rush, exploring the digital economy for our personal data, sifting spots in online pools and streams of our preferences, choices and locations. Data is the ultimate portable good, but moving it across borders requires countries to have consistent policies that build trust. Without global data management principles, we could face deepening digital rifts between nations, as massive data pools become increasingly isolated. This would be particularly costly for smaller, low-income countries.

Our data powers artificial intelligence (AI) that can make societies more productive, boost growth, jobs and finance. Think of more efficient supply chains, advances in vaccines, and loans to previously unbanked small businesses around the world. But there are also dark sides. More and more data can be captured without our effective consent by major platforms, such as Alibaba, Facebook, Google and MercadoLibre, whose valuations have increased exponentially in recent years.

CROSS-CUTTING ISSUES: A new IMF staff paper examines these challenges to growth, stability and the international system, which are central to the mandate of the International Monetary Fund (IMF) and calls for global cooperation to address them. Policymakers will need to start by recognizing that they face several key challenges spanning financial stability and inclusion, competition and privacy.

Foster competition and stability in the digital economy: Concentrating data on large platforms reduces competition and increases the risks of hacking and single points of failure in modern economic and financial networks (as evidenced by recent generalized service interruptions). Indeed, cyber attacks have been a major challenge in the data economy.

Promote inclusive digitization: Data can drive greater efficiency and inclusion, including in the delivery of financial services, as we have seen with the rise of fintech credit in many emerging and developing countries. But it can also be used by monopolies for price discrimination, increasing profits at the expense of customers. Data-based analysis could also be used to exclude certain people from economic and financial services on the basis of socio-economic or other personal characteristics (this is called “algorithmic bias”). This can disadvantage or exclude some people from important services that society considers essential, such as AI-based credit scoring which exacerbates racial bias in mortgages, or facial recognition technology which does not recognize tones. darker skin.

Balancing Privacy Tradeoffs: Policies to protect privacy – an important goal in most countries – can help reduce unauthorized use of personal data. The confidentiality of financial and medical data, for example, is a key component of trust in these systems. However, focusing only on privacy protection may prevent other uses of data that generate economic and social value – for example sharing anonymized vaccine trial data across borders – and can make it difficult for start-ups get the data they need to compete. data-rich incumbents. Clear rules are needed to deal with these tradeoffs, including giving individuals effective control over their data while balancing public policy needs for certain types of data disclosure.

TOWARDS GLOBAL PRINCIPLES: Meeting these challenges should start at home. A number of new policy tools and approaches are being considered to provide solutions to these challenges at the national level. Policymakers will need to continue to focus on developing up-to-date laws, systems and procedures to regulate data collection and use. At the same time, they will also need to consider mandates to make networks compatible with each other and allow users to move and store their data on different networks.

In addition, policymakers could consider whether and how agencies could be created to manage consent and protect privacy, as well as provide data as a public good. The establishment of “data trustees” – where third-party companies collect and share data on behalf of individuals (as is the case in India) – or the equivalent in credit bureaus data (for broader data classes beyond finance) are ideas to consider here. Balancing all compromises will require unprecedented cooperation between regulators and government agencies responsible for competition, financial stability, integrity, consumer protection and privacy.

But these problems are global. Data mobility across borders is the basis of a rapidly growing share of international trade in services, whose value reached around $ 6 trillion in 2018. Thus, given the risk of further political divergence, cooperation between countries will be essential to help prevent fragmentation. to gain a foothold in the global digital economy.

A COMMON APPROACH TO DATA: Countries’ treatment of privacy, competition and stability reflects their national priorities. And the resulting fragmentation could be damaging for small countries with smaller data pools and those more dependent on multinational digital companies. For example, strong privacy protections in some advanced countries can constitute trade barriers for service exporters from developing countries whose companies must incur exceptional costs to comply with the protections.

Therefore, there is a strong case for common global principles for the data economy. For example, a common understanding of definitions of government rules to protect privacy, as well as the types of businesses and business activities they should apply, could help narrow some of the policy differences between countries.

Many of the other national policy approaches proposed to manage the data economy – for example, the requirements that data should be more easily shared between platforms to promote competition or on how to manage an individual’s consent – could also benefit from common principles on their international application. Provided that privacy concerns can be adequately addressed, there is an opportunity for international coordination on the compilation and sharing of data sources from private digital companies for regulatory and public policy purposes.

As national and international efforts progress, tensions between data privacy, security, competition and stability will continue to emerge in the global digital economy.

The piece is retrieved from www.blogs.imf.org

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