On 4 May 2016, the European Banking Authority (EBA) published its Discussion Paper on innovative uses of consumer data by financial institutions. The paper identifies risks and benefits in relation to innovation for consumers and financial institutions.

According to the Discussion Paper, potential benefits to consumers include cost reductions and improved product quality, while financial institutions can benefit from new sources of revenue and reductions in costs. The main types of consumer risks identified by the EBA are mostly information asymmetries, data misuse and security.

Risks to financial institutions are identified as deriving from potential misuse of consumer data resulting in reputational risks.  Competitive distortions may also emerge as institutions which are not in a position to process consumer data may not be able to compete with new market entrants specialised in using consumer data.

Feedback received on this Discussion Paper will inform the EBA's decision on which, if any, further actions may be required to mitigate the risks arising from this innovation, while also allowing market participants to harness its benefits.

The deadline for the submission of comments is 4 August 2016 and all contributions received will be published by the EBA after this deadline.