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Wednesday 23 October 2019

The Readout

The digital wallet: who will own it?

Finance is being transformed – but we must figure out ownership and oversight of the data

By James Harding

Earlier this month in Washington DC, Tortoise brought together experts from the World Bank, the Institute of International Finance and more to investigate how the digital wallet will impact on society and business.

The digital wallet is making life easier. It’s like the mobile phone: immediate, handy and everywhere. It can facilitate transactions, it can bring the unbanked and underbanked into the financial fold, it can plug gaps in the market left by the banks – and it can assist the countless people juggling personal debts and penalties, the weekly salary and payment charges.

But it presents two sets of problems.

One, for the consumer. How can we be sure our data is private and safe? Do we know what we’re getting into, do we have transparency about what we’ve signed up for? And when things go wrong, who’s accountable?

The other, for industry. Do the tech platforms offer fair and equal access to all digital banking services? Likewise, do ‘open banking’ reforms require new as well as incumbent payment service providers to share their data?

Both in China and the US, the central banking authorities have intervened in the area of payments and data with very limited success. Regulatory responsibility in so many jurisdictions bounces between departments and agencies. We shouldn’t expect a wholesale rethinking of the regulation of the digital marketplace any time soon.

But if there is one concrete area that warrants work now, it’s data. The answer to who will own the digital wallet is whoever owns the data. The answers to both the consumer challenges and the questions for the financial services industry lie with the role of the central banks, the opportunities for ‘datamediaries’, the establishment of data trusts that hold individual data and the regulatory authorities in charge.

It’s easy to feel overwhelmed by the scale of digital disruption in finance. In fact, there’s a To Do List for public policymakers, bankers and technology businesses: it’s setting the terms of ownership and oversight of data.