Jamie Evans, Research Associate at the Personal Finance Research Centre, University of Bristol, posted this blog originally on the Money and Mental Health Policy Institute website. We are very grateful to them for allowing us to cross-share it below.
While the title above may sound ominous, greater sharing of data between financial firms could bring benefits to creditors and consumers alike – especially where customers in vulnerable situations are concerned.
This is something that I and my colleagues at the Personal Finance Research Centre (PFRC) are exploring in our latest research project, which has kindly been supported by the Barrow Cadbury Trust.
Sharing can be difficult
This may seem counterintuitive but the reason I think this subject is so important is because sharing – on a person-to-person level – is something that can be incredibly difficult to do.
Every day, hundreds, if not thousands, of people face really tough conversations with their creditors. They might need to disclose the death of a loved one, or reveal that they are living with a serious mental health condition which will severely affect their finances.
For many people, sharing such information is draining – no matter how kind, polite and empathetic the person at the other end of the phone line is.
After putting the phone down, the last thing that most people will want to do is to immediately repeat the conversation with one of their other creditors, and then probably another one after that.
Sharing data could be much easier
So rather than having multiple, similar conversations with different creditors – which can be difficult and time-consuming – what if the first creditor that you speak to could simply notify all of the others that you need to deal with?
They needn’t share information about the precise nature of your situation, but they could at least let others know what additional support you might need. This would ensure that all firms that you deal with are in a better position to support you with whatever you’re going through.
In a world of near-instantaneous data transfer, this is theoretically possible – though of course we need to explore the practicalities of doing this and, crucially, need to ask ourselves whether the potential benefits outweigh the costs and possible risks.
How could data sharing work in practice?
The Government’s ‘Tell Us Once’ service, which allows individuals to report a birth or death to most government organisations in one go, offers one possible example as to what such data sharing could look like from a consumer’s perspective.
A service like this offered by financial firms might go down well, especially when multiple firms have similar processes that are time-consuming and potentially upsetting (for example, when registering a death or Power of Attorney).
In time, such a service could be developed to deal with a wider range of customer circumstances.
Of course, describing how such a scheme would work at the ‘front end’ is one thing; saying how it would work at the ‘back end’ is quite another. There are many practical questions to consider: should organisations share information directly with one another, or should it be shared via a third-party database? If so, who manages this database and how do organisations get access to the data?
Then there is the question of how organisations can align the way they record information to make it suitable for sharing in the first place. Thankfully, on this point, financial firms can learn lessons from the electricity sector, which is currently aligning its ‘needs codes’ to improve sharing of information.
What are the risks of data sharing?
While there are potential benefits to data sharing, there are also risks that need to be carefully managed:
- Customers could lose control of their data. This control is vital if consumers are to trust the service.
- Firms could make mistakes if information isn’t recorded in a sufficiently clear, consistent or detailed way.
- Consumers could be inadvertently excluded from financial services because of their situation.
- Unscrupulous firms could exploit vulnerable consumers, e.g. by carrying out aggressive marketing or targeting them at certain times.
‘A problem shared is a problem halved’
There are clearly many issues to consider here, from the practicalities and costs to the question of what level of data sharing – if any – consumers would be comfortable with.
We are exploring such issues throughout the course of our research, beginning with a review of the available evidence, possible models, and the legal and regulatory frameworks.
Then, in the spirit of the old saying ‘a problem shared is a problem halved’, we’ll be engaging with as many experts as we possibly can. This, we hope, will allow us to produce a blueprint for a model of data-sharing that genuinely works both for firms and their customers.