Mark Vaughan, the managing director of QMV, has said financial institutions are finally cleaning up their act and cleaning up their customer data.

He has observed that banks, superannuation funds, insurers and wealth managers “have been working overtime since the royal commission, unpicking data issues and, of course where needed, compensating customers for account errors such as fee for no service and interest miscalculations”.

“Data remediation teams in some cases have swollen to hundreds or even thousands of personnel due to the complexity and extent of work required,” he outlined.

According to Mr Vaughan, a typical remediation program involves a number of steps: “Isolate the data error and identify the root cause, quarantine its spread, fix and compensate where appropriate, communicate with relevant stakeholders and implement change to prevent it from happening again.”

He said the demand for remediation as a service (RaaS) is increasing, with demand being seen for external specialists to run remediation programs.

The managing director is of the belief that “the whole industry will benefit from this movement”.

“There is an increased drive to ensure that remediation and preventative measures are effectively implemented to avoid expensive and time-consuming data errors happening in the first place,” he said.

While financial institutions have always had a focus on data, Mr Vaughan said he is now seeing them taking data quality to a higher level, “by actively implementing more robust controls and preventative measures to avoid expensive and time-consuming data errors happening in the first place”.

The most common causes of data error in financial institutions, according to Mr Vaughan, are unit pricing errors, delays in crediting or calculation of interest, missing or incorrect information like date of birth or salary, administrative data entry error, lack of internal controls and misinterpretation of fee calculations.

In addition, “invariably, on further investigation of an original issue, many other issues are unearthed”.

The managing director said “scope creep” is a major risk in remediation.

“The reality is, having issues with data is common and normal. It’s not about having the problem, it’s about how and when you find it, and how quickly you can quarantine and fix it,” he continued.

And with heavy scrutiny of the industry more prevalent than ever, “it has become requisite for all financial institutions to have both a dedicated unit that owns data quality and to have proven data quality software tools in place”.

It contrasts with bank and financial services behaviour in the past, where “many business units each somewhat owned data quality and therefore no one owned it,” Mr Vaughan said.

“Customer data held in disparate data silos is a big part of the problem.”

The insight comes as a new wave of changes takes place in the Australian regulatory landscape.

Recent changes to the Banking Code are targeted at better protecting vulnerable Australians, while 24 separate pieces of legislation are presently being considered by the government in an attempt to make the system fairer. 

APRA and ASIC have also praised legislative reform proposals around superannuation that would enhance “the close co-operation and collaboration between the two regulators”.