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The new banking ethics created by the digital transformation

For the banking industry, the digital revolution has brought new technologies and new types of customers and competitors. But it has also created a new set of ethical responsibilities regarding cybersecurity and the use of data. José Manuel González-Páramo, BBVA’s Executive Director, talked about those ethics, and the opportunities and challenges of digitization, during a speech at the Atrium of the Gentiles, a cultural dialogue organized by the engineering school ICADE and the Ecumenical Social Forum of Madrid. He said these ethics will require acting from a triple perspective: educational, business and regulatory

BBVA’s Executive Director began his presentation by recalling the three principles that, in his opinion, should govern the behavior of banks: prudence, integrity and transparency. He also reiterated that the financial sector is experiencing a phase of disruption, with new consumer trends and business models, which can be attributed to three forces: 1. Technology and the facilitators of data (big data, artificial intelligence and machine learning). 2. Changes in customers and their needs, influenced largely by the millennial generation. 3. New business models: the arrival of financial service startups and the entry of big players.

Financial inclusion and the use of big data

A great deal has been written about the digital transformation of the finance industry. But little has been said about the impact this change has had from an ethical standpoint. BBVA’s Executive Director pointed to two ethical opportunities, that have arisen from the digital transformation.

The first of these, González-Páramo said, is digital financial inclusion. In his opinion, "digitization favors the democratization of finance", thanks, above all, to the high degree of penetration of mobile technology.

In the second place, he underscored the use of big data to help, on the one hand, the unattended markets; and on the other, as knowledge for the common good. In the case of unattended markets, he explained that it is now possible to evaluate customers by using non-traditional data, thus drastically reducing the cost of reaching the unbanked consumer. In the case of knowledge for the common good, he stressed that data from the private sector could be used to create a new “data philanthropy.”

Cybersecurity and the use of data

But the digital transformation has also created challenges from an ethical point of view. González-Páramo pointed to two fundamental ones: cybersecurity and data protection. To meet these challenges, the BBVA Executive Director recommends a three-pronged approach: educational, business and regulatory.

In the realm of cybersecurity, he pointed to the need to raise awareness among the population regarding the risks to cybersecurity and the impossibility of protecting ourselves 100% of the time. In the area of training, people are the first line of defense. In fact, more than 70% of security breaches exploit non-technical weaknesses; for example, attacks that trick users into revealing legitimate credentials.

In the second place, he said, companies should understand the risks they are confronting and develop solid protection systems. They should also have solid training programs for employees. As for regulation, cooperation between governments and the private sector has become more important than ever.

As for the correct use of data, González-Páramo stressed that from an educational standpoint, people should be made to understand how their personal data will be managed and what their rights are; that´s why it’s necessary to use clear and understandable language in privacy clauses. He also underscored the need for companies to understand the “ethical” use of the data they obtain form customers.