Data science has an increasing impact on our lives, and not always for the better. People speak of “Big Data”, and demand regulation, but they don’t really understand what that would look like. I work in one of the few areas where data science is regulated, so I want to discuss one particular regulation and its consequences.
So, it’s finally time for me to publicly admit… I work in the finance sector.
These regulations apply to many different financial trades, but for illustrative purposes, I’m going to talk about loans. The problem with taking out a loan is that you need to pay it back plus interest. The interest is needed to give lenders a return on their investment, and to offset the losses from other borrowers who don’t pay it off. Lenders can increase profit margins and/or lower interest rates if they can predict who won’t pay off their debt, and decline those people. Data science is used to help make those decline decisions.
The US imposes two major restrictions on the data science. First, there’s anti-discrimination laws (a subject I might discuss at a later time) (ETA: it’s here). Second, an explanation must be provided to people who are declined.