Personal data has become the foundation of a multi-trillion-dollar global economy. People should treat their data like an asset, and their banks should help them invest it
It’s hard to believe that, a mere twenty years ago, the concept of “personal data” as we know it didn’t even exist. We used paper maps to find our way on road trips, we made most of our purchases with cash, and the pictures we took went into scrapbook photo albums. Facebook, Twitter, YouTube, Instagram and iPhones had yet to be invented. Twenty years later, those same activities create personal digital footprints that include our movements, connections, likes, travel photos, purchase histories and more.
Those digital footprints are now the raw resource for a global data economy valued at more than $3 trillion annually. Thousands of profitable companies around the world depend upon our personal data for their business — and we give to them for free.
This arrangement no longer makes any sense. The data we give to these companies is actually an asset that we invest in them, from which we reap practically no return. They make millions from the arrangement; we get personalized ads in our feeds. There are better ways to manage our data, ways that better serve those who generate it.
Think for a moment about another asset class, one that’s the foundation of its own global economy: cash. We earn it in the course of our daily lives, and we have lots of well-structured choices for investing it — savings accounts, mortgages, stock markets — so that it generates even more value for us, whether in interest, dividends, or asset appreciation. Data has, in the last twenty years, become an asset similar to cash. We generate it in the course of our daily lives, and there is no shortage of companies that want it, because they can generate value from it. The difference is that we don’t have any well-structured and easily-understood choices for investing it and sharing in the value it generates. That’s what needs to change, and the cash analogy provides a useful template for how to change it.
Imagine that, instead of giving your personal data away, you instead deposited it into a secure account with a data bank: it would go from your phone and tablet and laptop straight into a kind of digital safety deposit box. Now imagine that everyone else is direct-depositing their data into similar accounts, just as we all do with our cash. Suddenly, any company that wanted access to our personal data could no longer siphon it directly off our smartphones; that company would now have to deal with the data bank.
This arrangement would give the data bank the leverage to structure some vehicles for “investing” our data by sharing it with different companies. For instance, the data bank could offer a “consumer data fund” that pools all its customers’ data and offers it to grocers, airlines, restaurants, gas stations and other retail businesses. With hundreds of thousands of digital footprints in the fund, businesses would be eager to gain access to it. And the data bank would now have the leverage to establish terms of access: exactly what data would be invested, and what value investors would receive in exchange. Maybe that value takes the form of access fees, paid by businesses and distributed back to investors. Maybe it takes the form of deals or rebates from those businesses. Either way, suddenly your data assets are earning you a real return.
What if you are looking for a different risk-reward profile for investing your data? Data banks could structure other vehicles, such as a “social media account,” that share more of your data more widely in exchange for higher potential returns. As with your financial accounts and investments, these data investment vehicles would be backed by legal and social contracts that preserve privacy and ensure security.
This may seem like a major structural change to the data economy, but it would be surprisingly easy to set up. The obvious choice to do so is financial institutions themselves. Banks already have the computing capabilities and secure networks necessary to make it work. They have relationships with all the players – with the millions of individual investors needed to make data funds viable and attractive, as well as with the companies that would want access to them. Customers already trust banks with their financial data: we bank online, moving funds between investment vehicles, and never worrying that others are spying on our balances. Banks understand what it means to be the custodian and steward of others’ assets.
The upshot is that, on your personal devices, very little would change. If you are comfortable with the amount of data you are currently sharing, then by depositing your data in the bank and investing it in different funds, you’d still have all your apps with full functionality.
The only difference is that the data assets you generate through those apps would be creating wealth not just for others, but for you as well. This is a perfect example of a better data system, one that treats our personal data like the multi-trillion-dollar resource that it is, providing structures and contracts to protect your rights and ensure your control over the assets you own. The digital economy can be built around better data. It’s time to build it.