FCA launches consultation on use of synthetic data
The UK Financial Conduct Authority (FCA) today launched a consultation on the use of synthetic data in the financial services sector.
‘Synthetic’ data is a privacy preserving technique that could open up more opportunities for data sharing by generating statistically realistic, but ‘artificial’ data, that is readily accessible. Synthetic data is already used across other sectors, such as robotics and autonomous vehicles, and there is an early but growing level of exploration within financial services.
The FCA has already explored synthetic data through its TechSprints, and more recently the Digital Sandbox pilot, where it has sought to alleviate the data access challenge by making synthetic financial data available to participating firms. Participants in the Digital Sandbox pilot cited synthetic data as the most valuable feature on the platform, while simultaneously calling for development of these data assets to enable more effective testing and product development.
With this Call For Input, the FCA would like to conduct an introductory exploration of market attitudes towards synthetic data, and its potential for opening data sharing between firms, regulators and other public bodies.
There are different potential roles that the FCAcould perform regarding the further exploration and potential use of synthetic data in financial services. Broadly:
- Data Generator: The regulator collaborates with industry experts and academia to generate synthetic data in-house, to be shared with the industry. The regulator could obtain real data from multiple entities, ensuring a cross-section of industry is sampled and the data are not biased towards a single organisation. Synthetic data could also be shared with organisations holding real data for iterative benchmarking purposes, improving the quality of the data over time.
- Central Host: The regulator provides an independent hosting platform through which synthetic data can be stored, shared and accessed for the purposes of product development and testing.
- Coordinator: The regulator as a co-ordinating body to facilitate data sharing and/or collaboration opportunities for synthetic data generation.
These roles are not independent, and a regulator could perform one of the above roles or a combination of the three. To perform any of these roles, however, would require involvement from the industry on several fronts.
The FCA would like to assess the appetite of firms to co-operate with it and other organisations, for example by providing sample real data as an input into the generation process, as well as synthetic data generation expertise to ensure that the synthetic data produced is of optimal quality.
Furthermore, industry-wide synthetic data sharing would first and foremost require significant engagement from firms and public organisations. The FCA is therefore seeking to understand the extent to which organisations would be interested in using synthetic data, how often they would use it, and the volume of datasets they would require to realise significant benefits from synthetic data sharing.
This Call For Input will be of interest to:
- academics
- incumbents
- start-ups
- RegTechs and FinTechs
- technology firms
- regulators and policy-making bodies
The FCA is seeking evidence, views and answers to the questions asked throughout this Call For Input from interested stakeholders by 22 June 2022.