Needed—A Global Approach to Data in the Digital Age
IMF Blog, October 26, 2021
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Bibliographic details
- Authors: Vikram Haksar, Yan Carrire-Swallow, Kathleen Kao, Gabriel Quirs-Romero
- Published: October 26, 2021
Overview
- Authors: Vikram Haksar, Yan Carrière-Swallow, Kathleen Kao, Gabriel Quirós-Romero
- Date: October 26, 2021
- Summary: Data fuels AI and a range of productivity gains (supply chains, vaccine research, financial inclusion), but concentrated data pools and cross-border policy divergences risk fragmentation of the global digital economy, with particularly large costs for smaller and lower-income countries.
- Photo credit: sefa ozel by getty images
Cross-cutting issues
- Financial stability and inclusion, competition, and privacy are the key challenges policymakers must recognize and address.
- Findings:
- Concentration of data in large platforms reduces competition and increases risks of hacking and single points of failure in economic and financial networks; cyberattacks have been a key challenge in the data economy.
- Data can support greater efficiency and inclusion in services (for example, fintech credit in many emerging and developing countries) but can also be used for price discrimination that raises profits at the expense of customers.
- Data-driven analytics can be used to exclude people from economic and financial services based on socioeconomic or other personal characteristics (referred to as “algorithmic bias”).
- Examples of harms from biased data usage: AI-driven credit scoring that worsens racial bias in mortgage lending; facial recognition technology that fails to recognize darker skin tones.
- Policies to protect privacy can help lessen unauthorized use of personal data; privacy of financial and medical data is a key underpinning of trust in these systems.
- However, an exclusive focus on privacy may prevent other valuable uses of data (for example, sharing anonymized data on vaccine trials across borders) and make it hard for start-ups to obtain data needed to compete against data-rich incumbents.
- Key trade-off: giving people effective control over their data while balancing public policy needs for certain types of data disclosure.
Moving toward global principles
- Domestic actions needed:
- Develop updated laws, systems, and procedures for regulating data collection and use.
- Consider mandates for making networks compatible and allowing users to move and store their data on different networks.
- Consider creating agencies to manage consent, protect privacy, and provide data as a public good.
- Explore setting up “data fiduciaries” (third-party companies collecting and sharing data on behalf of individuals—as being explored in India) or the data equivalent of credit bureaus for broader classes of data beyond finance.
- Institutional coordination:
- Balancing trade-offs requires unprecedented cooperation among regulators and government agencies responsible for competition, financial stability, integrity, consumer protection, and privacy.
Needed—a common approach on data
- Rationale for global principles:
- Countries’ treatment of privacy, competition, and stability reflects national priorities; resulting fragmentation could damage smaller countries with smaller data pools and those dependent on multinational digital firms.
- Strong privacy protections in some advanced countries may act as trade barriers for exporters from developing nations that must incur exceptional costs to comply.
- A strong case exists for common global principles for the data economy, including common understandings of definitions in government rules to protect personal privacy and which firms and activities they should apply to.
- Benefits of international coordination:
- Domestic policy approaches (for example, requirements that data be more easily shared across platforms to promote competition or rules on managing an individual’s consent) could benefit from common principles on international application.
- Provided privacy concerns can be adequately addressed, there is scope for international coordination on compilation and sharing of data sources from private digital companies for regulatory and public policy purposes.
- Ongoing tensions:
- As domestic and international efforts advance, tensions between data privacy, security, competition, and stability will continue to play out in the global digital economy.
Key statistic
- The mobility of data across borders underpins a rapidly growing portion of international trade in services, whose value reached about 6 trillion dollars in 2018.
Source: Needed—A Global Approach to Data in the Digital Age, October 26, 2021.