ar130405 - Fotolia
One of Australia’s big four banks, NAB, has been accused of crossing the line when it sent a message to a customer about her efforts to secure a loan from a rival institution – something it knew about because of a data sharing deal with credit bureau Veda.
According to reports in the Fairfax media, a consumer received an email from the bank after applying for a loan elsewhere. It said that NAB’s “smarter” systems had alerted the bank to her actions and that it would like to offer alternative loan products. The consumer said she felt “violated” by the perceived invasion of privacy.
The situation raises the issue of how much data sharing consumers are willing to accept, and how big business needs to manage the fine line between responsible business practices and breach of customer trust.
NAB has acknowledged that it sources information from Veda about its business customers. “This helps us to understand if our customers are borrowing within their means and operating their businesses prudently.
“We believe it’s important that our bankers keep in touch with their business customers, especially when they are taking out lending with other institutions, to understand the intent of the finance and how it will affect their business operations.”
The bank said it was not taking private consumer data from Veda.
The Australian Privacy Principles, which govern how organisations can collect and use data, apply only to personal data, rather than business data. The issue for small business owners is that they can be one and the same.
Peter Swan, professor of finance at the University of NSW, said most banks kept a close eye on when their business customers took on any additional credit as part of prudent risk management strategies.
Read more about IT in Australian banking
- Despite Australia being iPhone crazy, its banks aren’t exactly rushing to enable the payment process.
- Australian bank and university work together to train the next generation of cyber security experts.
- National Australia Bank (NAB) opened its IT to its internal tech team and independent developers to access innovation.
He said if business customers increased their overall borrowing portfolio, the banks they had loan arrangements with might want to renegotiate the terms of those existing loans to reflect the additional risk caused by a larger overall debt.
However well-intentioned NAB’s data monitoring, it has been hung out to dry for the perceived – if not actual – breach of trust.
Longbing Cao, professor at the Advanced Analytics Institute at the University of Technology Sydney, said companies need to consider the ethics and privacy expectations of consumers when leveraging any data collections. While they were wise to use data, they should avoid its “overuse, misuse and abuse,” he said.
According to Longbing, without a formal code about how all data should be used, the “general social norms should apply”.
He said there were clear gaps in terms of the frameworks for use of data, and that professional bodies probably need to establish more rigorous frameworks for how data should be accessed and used.
There were also competitive issues to navigate, he said. “If a bank or an employee wants to improve their revenues and they have the chance to misuse data so the client gets a better deal, that may be unfair for the whole community or society,” said Longbing.