Page 274 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

At the same time, market power creates its own set of risks. Two, in particular, are noteworthy.

• Excessive economic power: Social networks could become the economy’s de facto gatekeeper. Social
networks can charge a premium for this very defensible role. Many of the merchants using social network
services will be small and do not have any negotiating leverage. Marketplaces with a similar structure
can charge very high rates. For example, Google and Apple take a 30 per cent fee on applications sold
through their stores. Uber takes up to 28 per cent (and perhaps more) of revenue. While an argument
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can be made that these fees reflect a reasonable distributor margin, these ‘distributors’ are not other
local merchants contributing to and benefiting from the local economy. This distributor margin is exported
(or at least transferred) to large foreign-owned companies.
• Discretionary influence: Social networks are information curators. Users do not have time to consume
all of the information their friends provide. Social networks must therefore decide what to expose/
promote and what to hide. Research shows this responsibility has enormous implications. For example,
social networks can influence elections by increasing voter turnout of certain populations (e.g., via "I
voted" buttons) or by influencing the attitudes through choice of what articles to display. This influence
also has commercial implications. Social networks can influence a user’s mood and that mood influences
cosmetics purchases, particularly on Mondays.
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Accordingly, we believe regulatory oversight is probably appropriate. Anti-trust laws, truth-in-advertising
requirements, and disclosure rules offer a starting point for a regulatory framework. But, these risks tread new
ground. For example, the evidence of ‘behavioural impact’ is locked away inside constantly changing databases
and software rules (try asking a machine learning algorithm why it showed some user a particular article).

5.2.3 Data privacy

Data collection can benefit the BoP by enabling free services subsidized through advertising and new services
such as lending. But, data collection poses inherent risks such as theft, accidental publication, fiduciary abuse,
discrimination, and persecution (political, religious, etc.). Consumer fear of these risks can create additional
problems, such as:

• avoiding personal research of diseases/health conditions;
• ending friendships to maintain a good credit rating;

• accepting the status quo of societal norms and laws;
• holding back information from friends and family.
Regulators must protect consumers from these risks without perpetuating the digital divide via overly restrictive
regulations. Privacy frameworks will be an important tool and there is already a large body of work to draw
upon. For example, the Organisation for Economic Co-operation and Development (OECD) Privacy Principles
address data collection limits, data quality, usage limits, security safeguards, accountability for violating
promises, and other topics. Developing these frameworks within the context of social networks and the BoP
will be critical. On one hand, social networks could be life-changing (digital on-ramps, lending, etc.). On the
other hand, the breadth and depth of data collected is staggering and introduces risks that BoP markets have
not previously needed to address.

11 Uber Increases Commission Fees for New York Drivers. February 10, 2016. http:// uberdriverdiaries. com/ ubers- pay- cut- a- one-
two- punch- for- new- york- drivers/ uber- increases- commission- fees- for- new- york- drivers/ (accessed August 19, 2016).
12 Schneier, Bruce. Data and Goliath: The Hidden Battles to Collect Your Data and Control Your World. W. W. Norton & Company.
2015.

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