The prevalent use of the internet, mobile phones, computers and algorithms has increased the digitization of public and private sector services. In Kenya, however, widely promoted financial service technologies (Fintechs) are being used to extract and exploit not ’just’ people’s data, but the vulnerabilities that arise from the data. That is the main conclusion of Hellen Smith’s PhD research. She will defend her PhD thesis on Friday, September 13, 2024, at Tilburg University.
Financial services technologies (Fintechs) are often promoted as key to financial inclusion and development of people who cannot access traditional banking services. The creation of digital identities and the use of interoperable digital databases is also seen as enabling people’s access to public and private sector services and promoting effective governance.
Corporations providing Fintech platforms and some international organizations and aid agencies argue that financial inclusion through digitization is key to human development. International organizations and aid agencies actually partner with Fintech companies (transnational and local) and government and non-governmental organizations to launch or implement these platforms using development aid and private aid.
Exploitation of vulnerabilities
In the scientific literature, Fintech loan platforms are often criticized for extracting and exploiting people’s data. While that may be the case, the case study of Kenya shows that, at micro and macro levels, Fintech transactions are in essence vulnerability-based, claims Hellen Smith: "Vulnerability is the key resource that is extracted and exploited by powerful actors."
Smith based her conclusion on 105 semi-structured interviews conducted in Kenya with government officials, regulators, international organizations, transnational and local corporations, and charities. She also convened 28 focus group discussions with individuals and groups impacted by the platforms selected for the study in five counties in Kenya.
For example, Fintechs extract data that reveal people’s vulnerabilities, their loan dependencies, their loan history including defaults, and their relationships with family, friends, colleagues, and others. These data are then often shared with or sold to actors in the Fintech space and also shared with or sold to third parties outside the Fintech space, creating a Fintech market. This creates opportunities to promote, for instance, predatory loan practices which in turn create new vulnerabilities for Fintech users.
Fundamental questions
According to Smith, the promotion of financial services by corporations providing Fintech platforms, international organizations and aid agencies alike arguably paves the way for this type of exploitation. In addition, existing regulations do not sufficiently regulate against exploitation of people’s vulnerabilities.
In general, these Fintech practices also raise fundamental questions that should be answered around the world: what exactly is being extracted and exploited as a result of the use of technology, by whom, and at what cost?
PhD defense
Hellen Smith will defend her PhD thesis on Friday, September 13, 2024, 13:30 hrs. at Tilburg University. Title PhD thesis: Extracting and exploiting vulnerability: case studies on the impact, governance and regulation of Fintech and digital identity systems in Kenya and markets that arise from their use. Supervisors: Prof. L.E.M. Taylor, Prof. M.E.A. Goodwin. The defense can be followed by livestream .
