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  • Writer's pictureCristina Ferrero Castaño

World Economic Forum calls for ensuring governance of data marketplaces

The institution calls for fairness and trust in global data ecosystems, promoting the use of information "for the common good".

Alberto Iglesias Fraga

El Español

August 12, 2021

We will start this article with a string of clichés: data is the new gold, the new oil, the raw material of the digital era.... I'm sure you are familiar with all of them, as they are nothing more than a reflection of a reality of our times that has been elevated to a marketing mantra.

And like all slogans, we sometimes miss the basics amidst all the bubbles. And in the case of big data, the forgotten fundamentals have been how to govern a sea of data markets that can be exploited on a global scale in a fair and transparent way.

In this regard, we must remember that the exchange and use of digital information has been key to solving challenges such as the covid-19 that still plagues us or responding to natural disasters of all kinds. However, these successes in mass data consumption have been made in spite of regulation, not because of it.

"Many barriers, such as commercial governance, public policy and regulation are hindering the sharing and use of data to solve critical challenges and bring innovation to society," agrees a recent World Economic Forum report. "Recent advances in technology give us the ability to deliver improved outcomes through shared data, rooted in responsible sharing, privacy and ethical standards."

In this document, dated at the beginning of the month, the institution calls for the development of a common governance framework for companies and public bodies around the world. Only in this way, according to the World Economic Forum, will it be possible to develop the successive data marketplaces, both generalist and vertical, that will bring the data economy to its maximum splendour.

"There is a need to develop a governance structure for data marketplaces that ensures trust while at the same time incentivising market participants," the WEF text continues. "In a well-designed marketplace, the providers of these marketplaces will be a key component, acting in the dual role of trust and economic incentive.

The World Economic Forum's report is not the result of an allegorical exercise, but of extensive work carried out by a group of experts (the Study Group on Vitalization of Data Marketplaces, from Japan, part of the WEF's Data for Common Purpose initiative, with more than 50 partners in 20 countries). And it all starts, as the text itself states, from a simple question: "What would the ideal governance structure for a 'data marketplace' look like?"

Confidence and liquidity

As the canons of any in-depth work dictate, the first thing the experts did was to narrow down the object of their analysis.

Thus, they understood that - as in any transaction between strangers - trust is the fundamental element of judgement ("minimising information asymmetry and other barriers to trade"), together with "liquidity" in the market ("the greater the number of participants, the more opportunities for matching the needs of buyers and sellers. And as liquidity increases with the volume of exchange, the price function tends to stabilise in the medium to long run").

However, the WEF authors warn at the outset, "accommodating a potentially infinite number of participants in a market requires a very careful system design, capable not only of providing confidence, but also of managing liquidity risks and the sustainability of the market itself".

With those two foundational principles in place, the World Economic Forum adds an additional - but basic - factor to the equation: interoperability. A point on which the body washes its hands of discussions related to "cultural beliefs, philosophies and nuances that are different from person to person".

This is what data marketplaces should look like

But what specifically does the World Economic Forum recommend in order to face the challenge of designing data marketplaces that comply with this approach, which has been so well outlined so far? This is where the document leaves more questions than answers, although there are some points that are a priori non-negotiable in the present and future design of data marketplaces.

"They must provide a secure and convenient settlement function, facilitating transactions. Providers of these data marketplaces must also audit buyers and sellers based on [unspecified] eligibility requirements and ensure data quality through [also unspecified] uniform formats and vocabularies.

"Providers must also disclose final transaction prices and other information about traded data, with mechanisms similar to those in equity markets," the report continues. "And they should provide arbitration mechanisms for disputes between buyers and sellers, as well as sanctions for those who violate the rules of the exchanges, including suspension of participants".

From there, the document only raises more and more questions on how to put these concepts into practice, especially in their international translation (with different regulations in place, at different speeds and with very different ethical and operational principles).

The WEF itself makes no bones about it: "It will be a long road [...] that will involve further discussions until the right solutions are found".

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