Batman or Joker? Technology’s critical role in fuelling change, improving customer experience, and enabling misconduct

Technology is fulfilling different roles across the world, with varying levels of economic development and the diversity of the global regulatory landscape dictating its form and function. It fills the gap in traditional financial services in Kenya through locally-developed MPesa, connects flexible legal resources to start-ups through Australia’s LawPath, and enables metro users to report issues through a simple chat message in Singapore.

The great enabler of social interaction, information sharing and business development is, however, facing challenges in several geographies. The European Union’s GDPR, which takes effect in May 2018, will introduce one of the strictest and most comprehensive data privacy regimes with the power to affect corporations around the world. In the United States representatives of iconic start-ups have been required to testify before Congress, while the Australian Competition and Consumer Commission (ACCC) has launched a world-first inquiry into the impact of digital platforms on competition in media and advertising markets.

With such a diverse landscape, what are the key risks, and corresponding opportunities, for companies seeking to leverage, and continue developing, disruptive technologies?

1. In the (first) line of fire: the financial sector

Unsurprisingly, financial institutions and insurance companies remain prime targets for regulatory action. After a decade of inquiries and investigations into a variety of practices, the onus is now on ensuring that the sector provides advice adapted to each individual consumer. As for upcoming trends, expect increased scrutiny of vertical integration practices, and therefore of cross-selling strategies.

Let’s start with tailoring advice to each customer’s risk profile and investment preferences. Big data holds the promise of integrating a variety of factors into instant consumer profiles blending credit history with elements such as social media posts and travel blogs. The potential is endless, as are the risks.

Firstly, data privacy. New financial institutions that hold financial data could, given an open data regime, blend their data assets with those of traditional banking and insurance institutions, or choose to build their own environments. Either way, cyber security regulation is being introduced and expanded in many countries, but at the same time there is a corresponding increase in hackers’ creativity in obtaining and employing personal and investment data.

Secondly, vertical integration of products and services, achieved either organically or, more often than not, through mergers and acquisitions. The result is increased profit per customer through cross-selling, a strategy common across the business world. Its popularity may have contributed to Australian Securities and Investments Commission’s increased scrutiny of the practice in Australia. Currently at the core of growth and marketing strategies, what used to be industry best practice may need to be reviewed in upcoming years, or redesigned to better respond to consumer’s need for convenience and transparency.

Chatbots have been proposed as a solution to growing demand for personalised advice, although their potential use in an advisory capacity brings about a host of ethical questions. Our Norton Rose Fulbright chatbot, Parker does not, for example, advise on legal matters. Instead, Parker provides information about the commencement and content of Australia’s new mandatory data breach notification laws. Technology will remain a cornerstone of identifying and managing conduct risk in the financial sector; however, it must be applied in a manner consistent with a business’ long-term strategy and ethics. 

2. The State of Competition

The ACCC has announced the launch of its Inquiry into the impact of digital platforms on the state of competition in media and advertising services markets. Particularly, it will consider the impact of these platforms on the supply of news and journalistic content, and the implications for media content creators, advertisers and consumers.  

Particular points of attention for the Inquiry will be:

• whether platform companies can leverage their dominance through tying or other unilateral conduct to enhance their market position, including through their ownership of personal data; and
• whether transparency in media reporting and advertising has been reduced through the use of advanced algorithms to process user data and deliver targeted content.

The question for the ACCC, ultimately, is whether the substantial benefits delivered by digital platforms have been accompanied by detriments. If so, whether such detriments can be appropriately addressed by competition law and policy. One does not envy the ACCC in grappling with the many nuances and complexities of this issue.

While this Inquiry is stated by the ACCC to be a ‘world first’, the ACCC is not alone in examining digital platforms and may consider the experiences of international regulators in other markets. For example, in 2017, a record fine of €2.42 billion was awarded by the European Commission following an investigation into alleged abuses of market dominance by a major global search engine provider.