FCA and BoE data sharing changes: the impact on lenders

With the BoE and FCA’s renewed focus on improving data collection and sharing within the credit information market, the industry has rightly raised questions.

What impact will these changes have on lenders? Do they really support market growth for the good of all? And what do lenders need to do to prepare?

To find out more, for this article, we spoke to industry thought leader, Ashley Beldham (ex Experian Director), who has seen the impact data sharing has for CRAs and lenders alike.

Let’s get into it. ??

The BoE and FCAs combined approach

The joint initiative by the Bank of England (BoE) and the Financial Conduct Authority (FCA) is expected to take several years to implement - which Ashley feels is much needed. Essentially, it represents a concerted effort to modernise and optimise data collection processes within the credit information market.

By aligning their efforts, they seek to create a more cohesive and efficient framework for data sharing, benefitting both regulators and financial institutions.

This combined approach is poised to bring about a significant shift in how data is collected, analysed, and utilised, with the overarching goal of creating a more robust and transparent financial system.

But lenders are likely to have mixed feelings about the proposed changes, as Ashley points out;

“On one hand, the requirement to share credit information with CRAs may lead to concerns about additional reporting obligations and potential operational adjustments. But on the other hand, the introduction of a common data reporting format could be viewed as a positive step that may ultimately streamline processes.”

Ashley goes on to say; “Lenders are rightfully cautious about the potential burden of additional reporting requirements and the practical implications of sharing sensitive customer data.”

It’s fair to say, there are concerns about the FCA's ability to strike a balance between promoting market competition and safeguarding the interests of lenders and consumers alike. This likely stems from a historical lack of clarity and sometimes unrealistic expectations from regulatory bodies.

Ashley adds; “Lenders are keen to ensure that the proposed changes genuinely have a positive customer outcome, in line with the Consumer Duty legislation.”

Future implications and industry outlook

The proposed changes could have far-reaching implications for industry dynamics and market participants. As the industry navigates this phase, several key considerations emerge:

#1: Data quality

It seems obvious. But maintaining and ensuring data quality will be essential to uphold the integrity of credit assessments and decision-making processes. Lenders will need to implement robust mechanisms to validate and verify the accuracy of the shared credit information. And also to minimise gaps in data like contact details and transactional data–the strategy here may be going multi-bureau. (Tools like data benchmarking can greatly help with assessing the bureau market.)

#2: Operational changes

Lenders may need to assess and adapt their operational processes to comply with the new data reporting requirements. This may involve investments in technology and resources to ensure seamless integration and reporting accuracy.

#3: Consumer empowerment

The emphasis on enhancing consumer access to and understanding of credit information presents an opportunity for lenders to engage with consumers in a more transparent and informative manner. This supports better customer experiences but also sits in line with Consumer Duty legislation. For this, lenders may need to develop strategies to empower consumers through improved credit education and awareness.

#4: Market competition

The push for greater market competition could lead to the emergence of new entrants and innovative credit products. Lenders will need to strategise and differentiate themselves in a more competitive environment. Keeping costs down is key to remaining competitive.

#5: Regulatory alignment

Lenders must ensure alignment with the evolving regulatory landscape. Staying aware of regulatory updates and demonstrating compliance with the new data reporting requirements will be crucial.

#6: Industry collaboration

Collaboration within the industry, including with credit reference agencies and other stakeholders, will be essential to navigate the changes effectively and ensure a smooth transition.

The key takeaway here?

Ashley Beldham says it best; “As the industry braces for these changes, the outlook highlights the potential for a more inclusive and competitive credit market.”

It’s fair to say we agree. While the short-term adjustments may pose challenges, the long-term implications point towards a more transparent, consumer-centric, and dynamic credit information market.

Final thoughts

To sum up, the proposed changes to the credit data-sharing market come with challenges and opportunities for lenders and the industry at large.

But here’s the thing. Lenders will be—quite rightly—apprehensive regarding the practical implications and the balance of interests, the overarching goal of enhancing market transparency, consumer empowerment, and competition is a shared objective.

As the industry evolves, the future outlook points towards a landscape characterised by improved data quality, enhanced consumer empowerment, and greater market dynamism. By proactively addressing these considerations, lenders can contribute to a more resilient and accessible credit environment, ultimately benefiting both industry participants and consumers.

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