Data Leveraging Business , Debt Revenue Obligations, Innovation and Privacy Concerns : An (Un)natural mix!

Years back, I read the book by Adam Tanner titled what stays in vegas which raised key concerns on privacy nailing that the biggest threat to your privacy might be closer to home. Tech giants, retailers, and other businesses gobble up vast amounts of your data with minimal oversight. The book amongst other things brought out the the case of a leading casino giant. They treat customers like playing cards, tracking every move to keep them coming back. This data-driven approach fuels their success, and other companies were following suit. There was the famous case of retailers knowing about teen pregnancy before the adults in the family becoming aware reported many years back again.

Businesses collect vast amounts of data often with minimal oversight. Companies use data to manipulate and target customers, like the casino giants strategy. The pressure to gather data creates an ethical dilemma for businesses. Among the more alarming points brought up here is that data analysis can extrapolate far more about things like very personal preferences and health conditions than it used to. Included therein is a demonstration of how easy it is to find a person’s medical records with only a birth date and a ZIP code. There’s a need to address the "dark side" of data collection to protect privacy.

Courtesy of Financial Times, I came across this - A chinese company named Micro Connect, provides financing to small businesses in China in exchange for a share of their daily revenue. This unique model generates real-time data on consumer spending habits, offering valuable insights for investors and economists.This, is revolutionizing China's retail data by converting small businesses' revenues into tradable instruments and valuable real-time data. By financing over 10,000 small stores, including pharmacies, Micro Connect collects a percentage of their daily revenue, generating a wealth of consumer spending data that economists praise for its transparency compared to official statistics

Micro Connect finances small businesses like hair salons and restaurants,receiving a percentage of their daily revenue. This data is aggregated and anonymized, providing insights into consumer spending trends across China. MicroConnect packages these data streams into tradable financial instruments called "Daily Revenue Obligations" (DROs). DROs are rated by credit agencies and can be traded on an exchange in Macau. (Unholy combination begins to come together here is one view, the opposite end of the spectrum view is innovation) This model bypasses China's strict lending regulations and offers alternative financing options for small businesses. Some concerns exist about the complexity of the model and potential risks for investors. Micro Connect's data offers valuable insights into China's economy, especially at a time when official data is less reliable. Additionally, Micro Connect's financial data website, "M-Terminal," provides insights into regional business performance, highlighting variations in consumer spending across different sectors and city sizes The company hopes to "fill a gap" in understanding Chinese consumer behavior.

The model's complexity and resemblance to CLOs raise concerns about potential risks, especially for investors in the junior tranches. Beijing might not appreciate Micro Connect's data shedding light on potential weaknesses in the real economy.Comparisons to peer-to-peer lending, outlawed in China due to scams, raise concerns about regulation.Overall, Micro Connect's innovative model leverages China's vast network of small businesses to generate valuable data and financial products, but risks and uncertainties remain. We have to see how this evolves.

Labels: Data, Innovation, Privacy