News and industry insights

The Importance of Clean Data

By Estatetrace on July 3rd, 2024

Uncovering the Uncomfortable Truth About Data in Mergers and Acquisitions

By Andy Davies, FI Relationship Manager, Estatetrace

Andy Davies discussed the importance of clean data

When you buy a house, you expect it to be clean, tidy, and ready to move into.  However, sometimes this is not the case.  The previous owners may have paid less attention than they should have when it comes to maintenance which has resulted in degradation or even unwanted items left behind the garage.  

The Hidden Issues of Acquisitions

With the house, things aren’t quite as perfect as they may seem.  Although it, may look fine on the outside, further inspection reveals cracks and less-than-welcome surprises.  It’s an analogy that can be applied directly to the financial services industry.  We regularly hear news about high-profile acquisitions such as the recent announcement that Nationwide is buying Virgin Money.   But the question with any acquisition like this needs to be: do they know what they are buying?

Let’s look at it in terms of data. We already know that there is a sizable data problem in financial services. According to an FCA survey, up to 20% of long-term savings belong to ‘gone aways’.  This is where the account holder has moved or died but the financial services provider hasn’t been notified. So, in a merger or acquisition situation, best practice should be to ask, is the customer data clean and up to date?  How can we understand the true value of the book of customers being bought, without confirming this first?

The Cost of Poor Data Quality

It is estimated that there is over £200 Billion in unclaimed assets in the UK including £1.6 Billion in banks and building societies and £4.2 billion dormant assets in National Savings and Investments.  In 2022 there was £26.6 billion in unclaimed pension funds, while there are a further £640 Million in dormant share registrations[1].  Across the industry, this relates to millions of people who are uncontactable with the customer information on file, either because they have moved or they have died. Therefore, if you purchase 1,000,000 customer records and an unknown amount belongs to deceased individuals, this will significantly affect the overall value of the acquisition.

This begs the question: How often is the integrity and accuracy of the data considered during an acquisition? Just how much is stacked up behind the garage? Could this have been further compounded by legacy acquisitions?

Regulatory Requirements for maintaining clean data

According to GDPR Article 5, customer data should be kept “accurate and, where necessary, kept up to date; every reasonable step must be taken to ensure that personal data that are inaccurate, having regard to the purposes for which they are processed, are erased or rectified without delay”.

This is a significant undertaking.  Therefore, financial institutions would do well to ask what has been or will be done to clean the data before acquisition.

Investing in Data Cleansing Solutions

There are various ways to clean data, all of which require an investment from the financial institution.  

The good news is that many organisations are meeting their regulatory obligations and ‘doing the right thing’ to trace gone-aways and repatriate funds with customers.  Of course, new technologies and services are assistive in this area.

If you are buying a house, it’s good practice to request a survey so you know what you’re getting. You can even stipulate removing the mess behind the garage! Of course, you may choose to overlook what’s behind the garage and trawl through yourself.  There may be one or two valuable items in the pile. Usually, if there’s any doubt in the contents of the sale, the acquirer will lowball the vendor in any event as a “prepare-for-the-worst” scenario, so removing this level of doubt circumnavigates this issue nicely for the vendor.

At Estatetrace we provide financial institutions with an enhanced solution to deal with the stuff behind the garage (gone aways, dormant account holders, known deceased, customers outside life expectancy, and non-responders) quickly and accurately. 

Clean data – Can you handle the truth?

When it comes to acquisitions in the financial services industry, we need to start asking questions about customer data.   These questions may well lead to uncomfortable truths, but they’re just that – the truth. If one in three of your legacy gone aways are deceased, this affects the value of the policy/account/investment you are administering; being willingly naive of it isn’t a solution, and may affect the value of your business as a whole.

Solving the data puzzle can be complex.  However, correct data cleansing offers an opportunity to sift the diamonds from the rough.  The value held in each account may be of secondary importance to the financial institution’s processes, but re-discovering a lost asset could mean a great deal to the end consumer, and proactive repatriation of funds will build trust with that newly acquired customer base.  Yes, it is an investment for financial institutions but it’s also a regulatory requirement. What’s more, proactive repatriation will avoid the awkward question: “Why was something left behind the garage for so long?”

Originally published in IBS Intelligence Journal

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