EBA delivers Discussion Paper on uses of consumer data by FIs

The paper identifies risks and benefits for consumers and financial institutions, as well as for financial integrity. 

EBA has identified a preliminary list of risks and potential benefits that the innovative uses of consumer data may bring for consumers, financial institutions and financial stability more widely. Institutions may obtain continuous insight into purchasing habits and preferences, as consumers engage in payment transactions through their accounts or cards.

EBA also flagged risks for consumers, mostly in the form of information asymmetries, and data misuse and security. This is the case when data usage is not properly described or updated in the contractual documentation provided by financial institutions, or when consumers may simply not understand the information on how their data may be used.

The Discussion Paper also identifies the risks to financial institutions. The questionable use of consumer data may expose institutions to reputational risks, while competitive distortions may emerge, as institutions which are not in a position to process consumer data may not be able to compete with new market entrants specialised in using consumer data. Issues related to data security are also valid for financial institutions, since they may become exposed to legal risks too if their IT and storage systems are compromised.

The work of the EBA focuses on the use of consumer data in the banking sector, including retail payments.