However, WhatsApp is a business entity and data is an asset. It is not surprising from a business standpoint that they wish to leverage data to enhance their services and grow their business.

Many businesses struggle with finding the right balance between providing a good customer experience and achieving their goals as for-profit organizations, between the convenience customers can enjoy and the business objectives of making a profit and increasing shareholder value.

When the scales tip in favor of one side, the other will be negatively impacted. In today’s digital age, customers’ personal information is often in the middle of this discourse. While the appropriate utilization of personal data by business will also benefit their customers, irresponsible exploitation will inflict damage on both parties and even harm the whole industry.

This reminds us of the importance of having a comprehensive policy when it comes to the protection of personal data in Indonesia. This is why the House of Representatives has been urged by consumers and the industry to approve the Personal Data Protection Bill.

Nowadays, for financial service providers – especially banks – the ability to collect, process and utilize data is a critical factor in performance and success. This ability determines whether a bank will remain relevant and competitive amid the rapid growth of technology companies in the financial services sector, especially considering that these fintech firms have been able to cater to increasing consumer demand for speed and convenience in conducting financial transactions.

Data collection by financial service providers has at least three main objectives. The first is to comply with regulations, for example, provisions on the implementation of anti-money laundering programs and the prevention of terrorism financing in the financial services sector. Financial service providers must employ stringent KYC (know-your-customer) measures to profile and confirm their customers’ identities.

Related information includes personal data, such as one’s name, address, place of birth, occupation and source of funds and income. Since collection of this data is mandated by the regulation, if it is not fulfilled, customers cannot open an account with any financial service provider.

The second goal is to meet customers’ demands. In addition to preliminary background information, financial service providers need further customer data to tailor their product offerings and services to each customer. For example, if a customer wishes to buy mutual fund products, the bank will require additional information to measure the customer's risk profile suitability with regard to the products. Different information is needed if the customer applies for loan products such as an unsecured loan or mortgage. Thus, the spectrum of data needed varies between customers for them to be able to fully reap the benefits offered by financial service providers.

The third objective is to improve service offerings. In order to secure customer loyalty and maintain competitiveness, financial service providers must constantly improve the quality of their products and service coverage. For this purpose, the necessary data to acquire goes beyond personal information and encompasses data that may not even be related to banking services.

These may include the patterns and frequency of telecommunication service usage or e-commerce transactions. Notwithstanding the challenges, without constantly evolving to improve their services, financial service providers may become redundant and lose their market share.

Advanced technology in the field of big data, artificial intelligence and machine learning is now available for use by financial service providers. One example is the use of artificial intelligence for credit scoring or measuring the risk level of prospective customers and estimating their ability to pay off loans. In the past, the amount and type of data used was relatively limited, for example, pay slips, employment papers, bank accounts and evidence of asset ownership.

But now such data is considered inadequate as it does not paint a complete and accurate picture of the financial condition of prospective customers. Besides, not all customers are able to provide it when applying for banking products.

Digital technology enables credit scoring to be done by utilizing more complex information. This includes phone and internet usage, grocery shopping, online credit installment payments and information regarding insurance, investments and other activities, such as travel and holidays. The use of technology in the process of examining this vast data allows banks to target a broader market segment.

This is especially the case in micro and small businesses that generally do not have adequate financial transaction records. If successfully implemented, it will increase the financial inclusion of the general population.

However, much of the electronic information is scattered among industries other than banking, such as e-commerce platforms, fintech firms, marketplaces and the telecommunications industry. Meanwhile, there is currently no uniform policy regarding the protection of personal data across industry sectors. This situation may result in different interpretations of the bounds of data gathering, which, if not addressed mindfully, could lead to unproductive disputes and further adversely affect customer trust in the industry.

Consumer data collection and data analytics are inevitable in the financial services industry. The quality and volume of data gathered will determine the results, either for the benefit of businesses, consumers or the general population. However, businesses’ ability to optimize their utilization of data with proper customer consent and clear guidance made based on prevailing regulations is equally important.

Therefore, a comprehensive data protection policy is urgently needed, not only to protect consumers but also to provide legal certainty for the businesses’ continuous efforts to grow. Speed matters. The longer the wait, the more we miss the opportunity to harness the power of data in this exciting digital age.

 ***

The writer is the head of the legal and corporate secretariat at PT Bank DBS Indonesia. The views expressed are personal.