banking royal commission

While the concept of “surveillance capitalism” has been around since at least 2014, a new bookThe Age of Surveillance Capitalism, by US academic Shoshanna Zuboff — one of the originators of the term — has resonated strongly following two years of revelations of the manipulative power wielded by major tech platforms and the lack of effective internal or external constraints on them.

The growing understanding of the nature of the big tech business model, based on the relentless acquisition of personal data to manipulate and predict consumer behaviour, has brought into focus just how much of a threat it poses to traditional concepts of freedom and privacy. The concept also has applications outside the immediate tech and social media space, however. Online interaction isn’t the only way of generating rich troves of personal information.

Two big changes in financial services have enabled the big banks to become powerhouses of personal data: vertical integration of retail banking, financial advice and wealth management services, and the move to cashless transactions. Consider how much detail about your life your electronic transactions generate beyond your immediate financial position: your work history, how often you consult a medical practice, any other services you purchase, whom you live with, where you travel, where you buy online, whom you send money to, and most of all, your discretionary spending — your pattern of consumption and how it is split across different categories that reveal a great deal about your lifestyle.

Short of taking a big wad of cash out of the bank and paying for everything with that, it’s very difficult not to generate what Zuboff refers to as the “data exhaust” that enables companies with data analytical capacity to construct detailed profiles of you that can be used to manipulate you or predict your behaviour.

This asset is valuable in itself and, like the big tech companies, the banks on-sell it, as New Daily reported, to other firms to exploit. But banks also use it themselves to manipulate customers into using services or products, or at least predict when they will need or want a particular financial product. The banks have justified this as a kind of value-adding necessitated because simple financial services have becomes commoditised and are no longer profitable. And the banks — at least until recently — have been open about how they use such data.

Speaking to a data analytics conference last year, one NAB executive boasted of the bank’s data-driven engagement strategy: “We’re trying to pick up all these happy and sad, exciting and troubling moments where the customer really does need to think about what’s going on with their financial circumstances … we’re spending a lot of time harnessing customer data enabled by our array of data solutions.”

Knowing a customer had just paid off a mortgage would mean, the executive added creepily, “NAB wants to celebrate that with you and more importantly, determine what’s next. Is it property investment, superannuation, is it share trading, or potentially helping your kids get into the house market?”

One of the key lessons — to the extent we didn’t already know it — from the banking royal commission is the extent to which banks have regularly pushed people into products they don’t need, often using pressure tactics. Loans, self-managed super funds, insurance products that consumers have no need for and in some cases can literally never use, all pushed on people seen less as customers than as easy marks, and often by financial advisers who stand to profit from it as well. The question “what next” for banks has always more correctly been “what’s the next way we can gouge more money from consumers?” And the use of personal data is, by their own admission, central to this process.

With the abandonment of vertical integration, the capacity of big banks to extend this process across a “customer’s” full life will be more limited than in the past. But as we move ever closer to a cashless society, our banks will become all the more powerful in terms of their capacity to use personal data to profile and manipulate us — probably second only to the big tech companies. Indeed, in the US, Facebook has begun approaching banks to try to obtain access to this key area of personal data, in which it has been relatively weak until now.

It’s clear that “surveillance capitalism” is a problem far beyond the likes of Facebook and Google. In an online world, it will be impossible to avoid producing “data exhaust” that can be used to profile, predict and manipulate our consumption of products and services, including financial products.