Data Customers Pay the Costs

By John McCormick  |  Posted 2005-06-14 Print this article Print

Steven Calderon was into his second week working as a security guard for Fry's Electronics when Anaheim, Calif., police walked in and arrested him. Fry's had requested a background check on Calderon, which was done by The Screening Network, a service of C

Data Customers Pay the Costs

These errors may be just a start, as the amount of data kept on individuals rises exponentially and new forms of complex data, like medical scans, get added to the record. Some 11 exabytes of new information are expected to be generated this year, most of it stored by magnetic means. This is the equivalent of 80,000 libraries holding as many books as the Library of Congress. And the amount of information being produced—and that needs to be kept accurate—is doubling every three years, according to a study by the University of California at Berkeley.

Data accuracy "is going to be a bigger problem than data security," says Larissa Moss, a data management consultant with the Cutter Consortium and a former information quality assurance manager for Security Pacific National Bank, now part of Bank of America.

The problem is fundamental: Few organizations really know how much of their data is accurate, and few have the necessary tools for validating the information they have or for cleaning it up. And even fewer have the staff in place to find, isolate and correct inaccurate information, English says.

Companies without proper information management and control, according to English, are already spending 10% or more of their operating revenue on fixing problems that stem from bad data: The incomplete specification that messes up a manufacturing run, a bad address that sent a package to the wrong place, an inaccurate bill or invoice that requires the intervention of a clerk. The work has to be done again, and the wrong data has to be found and fixed. Then there are the fines or penalties from a late shipment or missed deadline. And costs grow if the problem isn't easily identified and corrected—and, of course, many aren't.

English simply calls it the "cost of failure as a result of poor-quality information."

Those problems, however, pale in comparison to what he sees as an even bigger consequence of bad data—a loss of customer confidence or trust.

"The real cost," English points out, "is in alienation of the customer."

While companies realize that an incorrect bank statement or extra charges on a bill may send a customer into the arms of a competitor, English says they also need to understand that customers care about the little details, too. Barbra Streisand once pulled an account from a bank that misspelled her first name, he contends.

ChoicePoint has not reported any alienation from its corporate customers because of its data accuracy problems. Fry's, for instance, is still a ChoicePoint customer. Deutsche Bank in an April assessment of the company, however, said ChoicePoint might lose customers over the security breach.

ChoicePoint began life as a public company in 1997 when Equifax spun off its insurance services unit and related businesses. ChoicePoint would collect information on individuals for the insurance industry and check past claims, credit reports and other information to analyze individuals' insurance risk. Since then, it has acquired more than 60 companies that specialize in information ranging from drug testing to employee screening to DNA analysis. Along the way, it has collected, according to EPIC, Social Security numbers, property and vehicle information, addresses, and other bits of sensitive information. The company has data on more than 220 million U.S. citizens—about four of five Americans.

ChoicePoint information has been used to help families find missing children, law enforcement track down criminals, and insurance companies offer quick policy approvals.

But all companies find it problematic to keep data accurate and secure. The task at ChoicePoint and other data brokers is magnified by the billions of records they handle and the effect on individuals' lives that incorrect information can have, according to Randy Bean, managing partner of NewVantage Partners, an information-technology consultancy that works with large companies including Fidelity and Liberty Mutual Insurance.

Bean, who was also the general manager of business-to-business database marketing at Harte-Hanks Data Technologies and held information-technology planning positions at Bank of Boston, says data brokers and credit agencies, compared to other companies, have a greater responsibility to ensure the information they distribute is accurate.

"There needs to be the greatest sensitivity involved because people very willingly share their information with these organizations, be it when they make retail purchases or open bank accounts or medical records—whatever the case may be," he says. "And the organizations that capture that data ... ultimately must have responsibility for how that data is used and where it goes."

Story Guide:

Blur: The importance of Accuracy

  • Not Just Security — Accuracy.
  • "Serious" Errors are Common
  • Data Customers Pay the Costs
  • Collecting Data Without Garbage Filters
  • Records "Full of Inccuracies"
  • Crap In, Crap Out
  • Fix It Yourself
  • No Way To Check
  • ChoicePoint Data at a Glance


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