Data as a force for good: could data-sharing be used to benefit consumers in vulnerable situations?
It certainly won’t come as a surprise to readers that banks and other creditors hold a huge amount of data – but you may be surprised to learn that this data isn’t just restricted to individuals’ financial information and transaction data. In certain situations, data about a customer’s wider circumstances or ‘vulnerable’ situation is also recorded; for example, if they have a health condition or disability that might affect their ability to manage their money or communicate with the organisation.
This is something that regulated firms are required to do by the Financial Conduct Authority (FCA) in an effort to ensure that customers in vulnerable situations are treated fairly and provided with additional support where necessary. This support ranges from giving consumers greater choice about how the firm communicates with them, e.g. in braille, to making reasonable adjustments in relation to how and when the customer repays their debts. For customers in particularly difficult situations, such reasonable adjustments can be life-changing and, in some cases, even life-saving.
But, it is impossible for firms to make these changes without the relevant information – without the relevant data.
Are firms obtaining this data in the best way for consumers?
At the moment the vast majority of customers who are flagged as ‘vulnerable’ on firms’ systems have been classed in this way because they, or a trusted third party, have disclosed information about a vulnerable situation to the firm.
While this approach gives the customer control over what information they provide to which organisation, it can also be problematic. It can take a great deal of effort – both in terms of time and emotional exertion – to disclose such situations to financial firms; there are often complex processes to go through and many firms require individuals to provide evidence of their situation. This is tough on consumers and may put some people off from ever disclosing their situation to other organisations that they deal with – meaning they might not get support that otherwise would have been available to them.
latest research findings
This is backed up by our latest research, in which we surveyed members of the Money and Mental Health Policy Institute’s research community, all of whom had first-hand experience of mental health problems. We found that:
- Nearly half (44 per cent) of respondents have told at least one bank about their mental health condition and 38 per cent have told other types of lender.
- Over a quarter (26 per cent) of those surveyed had told more than one lender about their mental health problem (26 per cent).
- Two thirds (67 per cent) of those who had disclosed their condition to their bank found it difficult to do so, as did 65 per cent of those who disclosed to another creditor.
We asked participants to explain why they found it so difficult to disclose this information, and some of the responses were truly shocking; for example:
“Having to explain to banks/ other people you don’t know but you are forced to explain is very stressful and unnerving… I come away feeling guilty and angry with my past… it made me feel suicidal.” (Survey respondent)
Could data-sharing between organisations help?
Given the number of consumers telling multiple firms about their situation and the difficulty many of them have doing it, it seems there could be significant benefits if firms were to share more data with one another. That way customers would no longer be required to disclose their situation to every firm – they would only have to tell one. This would make the customer’s life easier and arguably save time and costs for firms too.
These benefits seem great, but of course there are significant risks that need to be managed. The information recorded and shared by one organisation needs to be sufficiently clear, consistent and detailed to be used by other organisations; and it needs to be up-to-date and free from error, especially in the case of vulnerable situations that are temporary or episodic. There is also the risk that firms use the information to exclude certain customers from particular products or even take advantage of the customer (though this is something that could equally happen under the status quo).
Data-sharing can only work if firms find a way to share data about such situations without putting consumers at risk. This is something that consumers recognise: 84 per cent of our survey respondents said they would be happy for firms to share data about their mental health with other firms providing certain conditions are met. Of these conditions, the most important by far is that consumers trust all of the organisations that share and use their data (71 per cent).
So how might data-sharing work in practice?
While it was beyond the scope of our research to recommend a preferred system of data-sharing, we wanted to at least get organisations talking about how such a system might work. Based on a review of available evidence, interviews with industry experts and other key stakeholders, and the results of our consumer survey – we have identified a series of ‘building blocks’ on which these discussions could be based:
- Data disclosure – organisations first need to consider ways of encouraging consumers to proactively disclose information about vulnerable situations to them. Crucially this involves creating an environment in which the consumer is comfortable and explaining why this information may be required.
- Data capture – vulnerability can be complex, multi-faceted and episodic, which makes it difficult to neatly categorise in the binary way usually favoured by digital systems. Firms therefore need to consider how they capture such data in a standardised way, if data-sharing is to work.
- Data hygiene – there must be systems in place to ensure that data is error-free and up-to-date, especially where consumers are affected by short-term or episodic vulnerable situations.
- Data-sharing – there are multiple possible ways that firms could share data, whether this be direct with other firms or via a third party database. New technologies such as blockchain and open banking may also give consumers greater control over their data.
- Data control – regardless of the way data is shared, it is of fundamental importance that the consumer retains control over their data and is able to change or delete the information stored about them, as required.
It is impossible to explain everything in detail in a short blog post, but these building blocks at least lay the foundations on which a data-sharing system could be built in future. Any conversations about such a system must take these factors into account. If not, we risk a system in which the possible benefits of increased data-sharing fail to outweigh its dangers.
Read the Executive Summary
Read the full Research Report
This blog was also published on the Personal Finance Research Centre’s Medium account on 16 April 2018.