Challenges in Business information markets in Asia and Europe

I was a speaker at the BIIA conference in Bangkok last week with the overall theme, "Technology + Regulation + Data -> Sustainable Growth?

What immediately stands out in this conference in Bangkok, with an Asia and Middle East oriented audience, are the significant differences between emerging markets and Europe when it comes to data availability and regulation. This is directly reflected in the efficiency of these developing information markets. Among other things, this translates into a difference in speed and quality of information-driven decisions for credit, compliance or other purposes. But also, indirectly, information inefficiency has a negative impact on the economy. This is because it limits access to credit for micro and small businesses about which little or no information is available.

The differences in data culture, -policy, and organization of business information management between Asia and Europe is not something new. BI is a global market, and we know all too well the opportunities and constraints in the different regions. What strikes me, however, is that the catching up is not happening quickly. And if it does happen, I suspect that this may well be in a very dissimilar direction to the way we are known to operate in Europe. Despite a strong learning curve and knowledge exchange between the continents, a level playing field in the business information world remains an illusion for the future. Just as intended harmonization of legislation in the EU also does not lead to a uniform European data policy with clear definitions for all.

But more important, in the emerging markets, out of necessity or not, more solutions are being explored to build a data culture of their own. Where data is scarce, there are other ways to retrieve alternative data. Also, services are being developed that, with the absence of public sector data, still help to make effectively informed decisions about transactions or portfolios. 

One example is Digital Banking. One characteristic of these types of Open Finance solutions that should not be underestimated is that they are based on consent (vs. legitimate interest), mostly from the account holder. A second feature is that the information is like an embedded package, an integral part of the service performed by the financial service provider. They facilitate the primary process of the transaction itself; they are trusted by both parties and have permission to retrieve and use data. This is the best information position you can get: as an insider and with the consent of the source. Cash remains king over data. This leaves the secondary or external information providers (BI agencies) out of the loop. Especially when it comes to information about SME’s where the availability of external (financial) data is limited. In this SME space, Open Finance solutions can also become a serious competitive alternative in European markets. An additional potential opportunity for Open Finance is the lack of clarity on the definition of a sole proprietorship in relation to the legitimate interest in collecting and providing information on sole traders without the consent of the data subject.

With the lack of availability of good public data, the need to tap into alternative data is high. And this is further spurred by innovative technology such as AI/ML. The adoption of new technology and user acceptance of alternative data sources (as opposed to the traditional (public) sources we have become addicted to in Europe) may well be the catalyst for innovation driven from the East.

The data policy and legislative framework around business information in Europe is by no means blissful. At its root, the muddled nature of European data policy is the result of EU legislation aimed at both transparency and protectionism. These two objectives overlap and conflict, creating uncertainty and ambiguity. The economy and trade benefits from efficiently functioning markets where information is equally available to all and without information risks. These information risks have now seriously emerged for information providers and for companies that use the information in their business operations. The risks arise from unclear implementation, execution of the legislative framework around business information as well as its interpretation and supervision by (local) Data Protection Authorities.

Looking at this way, the muddled EU data policy (with, despite everything, still the convenience of relatively sufficient data availability) may well prove to be the ‘law of the inhibiting lead’ for Europe. And Asia can learn a lot from the European business information market, but would do well not to copy it. 

So, there are plenty of challenges in both Europe and Asia!

Gertjan Kaart is CEO of Creditsafe for the Region NWE (NL, DE, BE, LU, AT) and is President of FEBIS (Federation of Business Information Services)

Source: Gertjan Kaart/Creditsafe