By Tammy Bangs, Director of Channel & Financial Services Partnerships, ID Dataweb
Over my many years working with community FIs and fintechs, I’ve realized what a huge problem data decay presents to financial institutions.
So, what exactly is data decay? It refers to the gradual degradation of data quality over time, often due to outdated information or system incompatibilities. It matters because it undermines decision-making, increases operational inefficiencies, and poses compliance risks.
In the beginning of my fintech career, during core migrations, I heard installers say, “Garbage in, garbage out.” These installers were lamenting the data situation, the lack of clean data, and the amount of garbage records being converted. In fact, according to docuclipper, “data entry, with no verification layer steps, has an error rate as high as 4%. That is 4 errors per 100 entries.”
For example, you might have two identical client records, one using punctuation after the middle initial and one with no punctuation. Even if you’ve had policies in place for years to reduce or remove this type of error, you could very likely still have these types of inconsistencies on the books.
What Data Decay Looks Like
What’s also concerning is the lack of current, actionable data on your accounts. How many of your clients have changed phone numbers and neglected to let you know? Or email addresses? How many small business accounts have neglected cleaning up their user list of any past employees? These are the types of issues that can lead to risk that isn’t just inconvenient, but actual fraud or the inability to connect with a client when you really need to.
Our data suggests that up to 1/3 of 1% of your client data is using personally identifiable information that doesn’t belong to them. According to FI Works:
- Up to 25% of data in the average financial institution’s CIF/CIS is incorrect
- 2.5-3.4% is the rate that a financial institution’s data decays each month
- 60% of financial institution executives say the quality of data used in marketing and BI is unacceptable.
Taking Action Against Data Decay
How can you detect bad data? That is where we can help.
During batch directory cleanup for your FI, ID Dataweb takes a secure FTP containing information from your client list and checks these specific items:
- Are there duplicates?
- Does the SSN match the other information on the client?
- Is the client alive?
- Is the phone number provided on the record associated with the client/address?
- Is the phone number active?
- Is a business email address active?
- Does the address on record associated with the client?
- Is there any known fraud associated with the physical address, email address, or phone number?
- Is the phone number a potentially ‘unsafe’ phone type, i.e. VOIP?
- Has the phone number been recently ported?
Obviously, no one single item (other than perhaps a deceased identity or mismatched SSN) would nearly always indicate fraud, but all of these are indicators of potential risk, just waiting on your customer records.
Take a moment to think of mergers and acquisitions, or perhaps an upcoming conversion you have on the horizon. Cleaner data on these always speeds the ploughs and ensures an easier transition in the future.
The same is true for marketing efforts. If you’re doing the in-depth work of marketing to your existing client base to give them next-best product fits and attempting to increase their wallet share but you’re sending those items through contact channels that aren’t valid, you’ve wasted your efforts.
Ready to rethink how you manage client records? Let’s connect to explore how ID Dataweb can help—whether you’re looking for guidance, solutions, or just a fresh perspective.
