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Digital Technologies Introduce Privacy Issues in the Financial Sector

Introduction

Financiers, especially banks, must generate confidence in handling the vast transactions to remain trustworthy in the digital era. The globe has experienced tremendous technological transformations, which have both advantages and disadvantages to the financial sectors. Some of the notable new techs include data analytics, artificial intelligence, biometrics, and blockchain to enhance business competitiveness. However, the emergence of such technologies and their adoption in the financial industry introduce privacy challenges. Customer data indicates consumer behavior, but there is a high skepticism over information risks (Cabrera-Sánchez & Villarejo-Ramos, 2019). Therefore, this research paper evaluates the ethical problem associated with applying big data in the banking world, identifies the involved stakeholders, examines the possible alternatives, and proposes the best action course. Notably, big data helps banks serve their clients better, but they must prioritize safeguarding personal and sensitive information to limit public outcry and legal consequences.

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Problem Identification

The financial sector is going digital to keep pace with the ongoing modifications and the shifts in consumer conduct, although such a move has drawbacks. Banks now offer many online services, such as mobile and Internet banking, and they must gather a significant volume of information to serve diverse patrons excellently. The technology-driven techniques have allowed financial companies to expand their product portfolio and customer reach. Nonetheless, the question of whether or not the firms can warrant data protection emerges. According to Gashi and Peci (2020), collecting huge data volumes demands appropriate safety precautions, whereby there should be free data movement but with limited unauthorized use. The worry over data misuse stretches into the stock market, where there is a growing concern on how to enforce data shielding in the digital trading regime. Correspondingly, the need to ensure safe and legal utilization of user details stresses participants in the modern financial space.

Implementing big data techniques in the banking division propagates many risks that may compromise growth in the absence of proper governance. Gashi and Peci (2020) assert that failure to enforce data security leads to consumer privacy violations. The improper handling of vast data has dragged several entities into problems due to the misuse of sensitive commercial operations details. In this case, the emphasis is on how banks and other lenders access and use personal information to offer various products, such as loan approval (Gashi & Peci, 2020). Laws and policies govern how organizations interact with individuals’ particulars. Traditionally, violators must compensate for breaking client privacy depending on the legislation or regulation in effect (Nekit et al., 2020). Nevertheless, the rapid evolution of novel technologies undermines the legal data defense, requiring a more holistic approach to contemporary technologies sustainable deployment.

Stakeholder Analysis

The critical stakeholders in the ethical issue of data privacy in the monetary industry include financial institutions, customers, services providers, and government. Banks and organizations in the same business line are the utilizers of patrons’ information. In this case, the money keepers and lenders prompt customers to avail their data to receive the desired service. Thus, the ethical concern starts with the banks since they are the data handlers. Besides, banks conventionally regulate clients’ details because the identifying materials flow between them and the clientele (Martin, 2019). Subsequently, the financial establishments can either initiate the privacy violation by misusing the facts they possess or granting access to the third party or avoid the problem by acting responsibly.

Customers are the information owners, and it is their discretion to give such statements to the respective financial firm for whichever reason. It is now customary for clients to produce identification details to consume digital commodities and services, allowing the bankers or creditors to withhold personal information (Martin, 2019). A typical example is how mobile money operators demand recognition documents for recording to process cash transfer requests. Due to the high preference, there is an expansion of electronic payment methods, implying increased personal information circulation (Martin, 2019). Accordingly, any privacy breach affects the customers directly, and they may suffer severe damages.

The service providers act as the intermediaries between the financial enterprises and the customers when it comes to digital banking and funds transaction. Martin (2019) contends that service facilitators connect millions of people to economic entities and support the Internet and mobile money actions. They are vital partakers in the selected ethical subject because they are the information transmitters, and they can leak such delicate descriptions to unapproved groups (Martin, 2019). Nonetheless, they can mitigate fraud and any financial crime incorporating data exploitation, particularly by tracking capital flow (Martin, 2019). Hence, the moral affair and the appropriate countermeasures can evolve from the service givers’ behavior.

The government is the chief regulator since it controls financial corporations and service providers and can also influence consumer habits. The state often accomplishes mobile money surveillance and imposes an obligation on banks, credit facilitators, and telecommunication companies to ensure privacy protection (Martin, 2019). The federal administration has the mandate of setting data safety standards through policy-making. The national authority enacts laws to preserve personal data and form the overseeing agencies (Alkhasawneh, 2020). Appropriately, the effectiveness of the leadership’s role in data safety influences the degree of privacy enforcement in the financial arena.

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Alternatives

Implement Regulatory Technologies

Traditional mechanisms may not help address difficulties that modern technologies pose on the financial businesses, hence the necessity to rely on supporting advanced intelligence. In this respect, it may be practical to apply compliance-helping applications, such as RegTech. RegTech is a controlling technology, which ensures banks are compliant to streamline the product provision process (Arner et al., 2020). The strategy is beneficial as the world moves away from being policy-driven to automation-propelled. The United States market is mostly free due to extensive deregulation, and the computerized concurrence supervision will shield vulnerable customers (Arner et al., 2020). Notably, RegTech and similar systems boost data compliance due to high digital infrastructure versatility.

Employing new knowledge to respond to controversial ethical topics comes with advantages and disadvantages. Putting into practice regulatory technologies reduces conflicts that different regulations trigger (Arner et al., 2020). As such, because of the modernized compliance procedure, financial enterprises will avert conflicting requirements. The alternative will also result in reduced observance costs since there will be limited transgression incidences. The tactic will also ease customized measures development to fit each sub-division because of enhanced pliability (Arner et al., 2020). Nevertheless, the option comes with the drawbacks, which mostly accompany digital operating frameworks. The set-up will require a continual update, demanding that the company become technologically proactive (Arner et al., 2020). Moreover, there will be additional installation, maintenance, and upgrading expenses. Suitably, the substitute will force the interested corporations to shift to data-based business models entirely.

User Education

It is fundamental to train consumers on using the Internet wisely to avoid falling victims to cybercrime. Lavranou and Tsohou (2019) suggest educating customers on the appropriate ways of treating confidential data. Therefore, financial consortiums and relevant government bodies should join hands and offer user education by making individuals aware of data storage, management, and corresponding rights. Clients should contribute to privacy security improvement by possessing sufficient competency to behave when giving out details (Lavranou & Tsohou, 2019). Remarkably, the proposal comprises empowering financial services customers to apprehend privacy contravention and possible protective routines.

As a potential solution to data safeguarding challenges, user education has merits and demerits, influencing its acceptance. The program is the best supplement to the conventional encryption schemes, which most entities wield. Furthermore, it will enable users to feel comfortable executing any data-pegged dealing (Lavranou & Tsohou, 2019). However, people may lack the incentive to learn how their data moves once they share with a financial entity. Additionally, the method demands a high level of understanding, especially when it comes to technical knowledge (Lavranou & Tsohou, 2019). Thus, the formal training must be consistent to address the emerging privacy matters, and the concern groups may not be committed as expected. Accordingly, the suggested plan’s functionality depends on the banks and other regulatory partners’ willingness to invest in coaching users on limiting the misuse of their credentials.

Create a Data Integrity Culture

Commercial ventures should demonstrate respect for absolute consent and design internal mechanisms to automatically direct employees to be sensible when handling customers’ information. Brigham and Ehrhardt (2017) argue that the ethical level is depicted through workers’ readiness to comply with the governing rules and laws. Banks must appreciate that it takes an individualized initiative to stand out as a highly compliant entity, reducing exposure to the data protection-associated risks while operating competitively. Hubbard et al. (2019) submit that financial establishments must ensure data accountability and transparency at all costs. Consequently, every corporation should formulate the inner methods of warranting the patrons’ data’s acceptable utilization and integrate them into the organizational culture.

Creating a data integrity custom will benefit financial companies in several ways, but it has some limitations. The approach will enable the involved entities to have quality information for improved policy-making (Hubbard et al., 2019). In this regard, the alternative will result in enterprises having the correct details necessary for judging the way forward besides being immune to costly privacy breach outcomes. Moreover, the move is cheap since there are minimal additional costs to gather for the relevant adjustments. Regardless, the proposition does not curb cyberattacks’ danger because it targets transforming how organizations manage clients’ information and not building resilience to external intrusion. Additionally, it does not work independently, but it needs coupling with encryption and legislation to attain the desired data probity. Hence, the extent the financial firms can generate a custom of adhering to information uprightness affects the scheme’s efficacy.

Proposed Course of Action

The best course of action is for financial institutions to build a data integrity culture. The recommended action addresses the root cause of the problem, and hence it is a preventive measure rather than a corrective. Brigham and Ehrhardt (2017) contend that it is vital to enhance corporate governance to mitigate agency complications, motivating employees to serve self-interests. The alternative is feasible because its implementation requires minimal modifications and, therefore, unlikely to invoke any resistance. It is also cost-effective considering that the expenses a company will incur in transforming the corporate custom are insignificant compared to data security dereliction. The option renders the most favorable outcomes than the other two choices and has extra benefits than just fixing the matter at hand. Consequently, the suggestion offers a competitive advantage because it raises the clients’ trust level, boosting customer attraction and loyalty.

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The implementation framework is straightforward, further affirming the plan’s practicability. The initial step will be to develop operation standards, which will guide personnel in dealing with patrons’ information. Hubbard et al. (2019) submit that organizations need to focus on security and privacy controls and then align with the mission. After that, standardization of security services follows, which involves evaluating the existing requirements, updating consents, rectifying overlaps, and readjusting to conform to the international levels where necessary. The execution should be systematic and realistic to increase the success chances. Subsequently, each institution will set pragmatic objectives, which will direct the enactment. The two crucial alterations will be creating the data control department and the whistleblowing office for oversight purposes. Notwithstanding, it is worth noting that informers sacrifice a lot and deserve protection and reward (Griffith et al., 2018). Finally, it is requisite to educate all the employees on the whole master plan.

Conclusion

Current technologies spiral and enlarge business activities because of increased efficiency. Nonetheless, most of them are data-managed, hence triggering ethical disquiet regarding privacy protection. The worry over data safety is predominant in the financial sector due to the transition to Internet banking and mobile money transactions. Subsequently, there is mounting pressure on financial institutions, primarily banks, to affirm that clientele’ particulars are safe with them while averting privacy infringement-related harm. The matter concerns financial corporations, consumers, service providers, and the government as they must respond accordingly. The significant responsibility to deter data mismanagement lies with the banks. Consequently, they must adopt a tradition that prioritizes data quality and safety by standardizing security procedures, checks and balances, and installing a sense of obligation on data protection among employees. Notably, big data is highly promising to revolutionize financial operations, but the affected firms must ensure data security to be ethical and ultimately dependable.

References

Alkhasawneh, A. (2020). The future of biometric data protection in Jordan in light of the GDPR: Do we need to comply with the GDPR? Journal of Legal, Ethical and Regulatory Issues, 23(2), 1-19.

Arner, D. W., Zetzsche, D. A., Buckley, R. P., & Weber, R. H. (2020). The future of data-driven finance and RegTech: Lessons from EU big bang II. Stanford Journal of Law, Business & Finance, 25(2), 245-288.

Brigham, E. F., & Ehrhardt, M. C (2017). Financial management: Theory & practice (16th ed.). Cengage.

Cabrera-Sánchez, J., & Villarejo-Ramos, Á. F. (2019). Factors affecting the adoption of big data analytics in companies. Revista De Administração De Empresas, 59(6), 415-429.

Gashi, F., & Peci, B. (2020). Protection of personal data and privacy in banking sector in Kosovo and its impact in consumer protection. Perspectives of Law and Public Administration, 9(1), 70-78.

Griffith, S., Norberg, J. A., & Engoron, I. (2018). What would we do without them: Whistleblowers in the era of Sarbanes-Oxley and Dodd-Frank †. Fordham Journal of Corporate & Financial Law, 23(2), 379-435.

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Hubbard, T., Fabius, J., & Steinhoff, J. (2019). Harnessing and protecting data assets in a 21st century financial enterprise. The Journal of Government Financial Management, 67(4), 34-41.

Lavranou, R., & Tsohou, A. (2019). Developing and validating a common body of knowledge for information privacy. Information and Computer Security, 27(5), 668-686. Web.

Martin, A. (2019). Mobile money platform surveillance. Surveillance & Society, 17(1), 213-222.

Nekit, K., Kolodin, D., & Fedorov, V. (2020). Personal data protection and liability for damage in the field of the internet of things. Juridical Tribune Journal, 10(1), 80-93.

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