The Shadow Costs of Financial Inclusion in Data-Driven Economies

Abstract

The emergence of large technology companies and their entry into global financial services offer new opportunities for financial inclusion, efficiency, and stability. In particular, the Global Findex 2021 indicate significant progress in the access to digital financial services despite the crushing effect of COVID-19 pandemic on traditional financial institutions and legacy infrastructures. But despite these potentials, their data-driven business model has inherent challenges and hidden costs that have propelled consumer data privacy, protection and use to the forefront of regulatory policies. This paper has two primary aims. Firstly, it explores the theories of platform-based business dynamics in articulating the impact on financial inclusion and the emerging privacy costs in digital financial services. Secondly, it proposes a new innovative strategy to the fill the noticeable gaps in the existing platform governance regulations based on the monetisation of consumer data privacy, thus balancing consumer welfare, competition, financial regulation, financial inclusion and data governance.