Banks that spy on your private life to flog their deals

They monitor your shopping habits, when you eat out, where you go on holiday — and they even know when you’re planning for a baby

BANkS are exploiting the rise of debit cards, mobile phones and social media such as Twitter to collect vast amounts of data about you and your family.

In the past, it was reasonable to expect your bank manager to keep tabs on your spending. If you were emptying your account almost every month, he might ask whether you needed an overdraft.

Equally, if you built up a surplus you didn’t spend, the bank might suggest opening a savings account to earn more interest. But those personal relationships are long gone. Now your spending is monitored around the clock by an army of machines that can pinpoint the precise moment you’re most vulnerable to a sales pitch.

The arrival of Chip-and-Pin cards in 2005 dramatically altered the amount of information banks can collect.

A decade ago, card payments accounted for just 55 pc of spending in shops, and cash the vast majority of the rest. Today debit cards account for £3 in every £4 spent in shops.

Experts say at this rate, cash could disappear altogether by 2020.

Every time you pay by card, the details of your spending are logged by your bank. It can see where you buy your groceries, when you visit restaurants and how much you spend on clothes.

Banks can combine this data with details of your salary or pension to build up a terrifyingly accurate picture of your financial life.

Now the big High Street lenders are using new technology to analyse this data and spot sales opportunities.

Almost all the major names have developed elaborate tools which they say help customers track their spending and keep their budgets under control. But they also show how banks are able to build up enormous files on each customer.

Santander pulls together the information through a service called Spendlytics, which is available as a mobile phone app.

This shows customers how much they spend at individual retailers. The data is broken down into 12 categories, such as electronics, department stores and petrol stations.

Lloyds offers a very similar service called Money Manager. RBS, Barclays and Santander all offer rewards schemes that track how much you spend on travel bookings, TV packages and so on — and offer cashback of up to 3 pc.

American Express monitors which shops its customers use most and offers tailored discounts to the same — or similar — retailers with which it has partnerships.

Justin Modray, founder of consumer website Candid Money, says: ‘Once a bank has been able to create a picture of how you shop, it’s easier for it to judge what type of credit card you might choose or whether you need extra insurance for valuables in your home.

‘These types of management tools are very useful for many customers — but they can also be invaluable to bank sales teams.’

Chris Popple, head of digital banking at RBS, says banks also use your spending data to ‘ coach’ you into habits of which it approves.

For example, RBS has an app for people saving for a house deposit which warns them if they’re spending too much.

If it convinces you to rein in your spending, you’re likely to build up a deposit more quickly — which means it can sell you a mortgage sooner.

And as a silver lining, the ‘coaching’ could make you a less risky borrower once you’re on the ladder. Mr Popple says that in the past, a good branch manager ‘would have known everything about you’ — and done the same.

But, in truth, these calculations are all done by machines that see you as a faceless customer from which the bank needs to make a profit.

HSBC is trialling a mobile phone app called Nudge. Customers who sign up agree to let the bank conduct detailed analysis of their spending and offer advice.

For instance, the app might show your monthly spending on fancy coffees and encourage you to cut down.

It could warn that you spend more on your weekly shop than is typical for someone on your salary. Or it could advise you to cook at home more often if the data suggests you eat out a lot.

WHAT TO EXPECT IF YOU’RE EXPECTING

BANkS have also started using new surveillance techniques to identify moments when they think you might be a softer target.

For example, if they find out you’re thinking of buying a house, they’ll be desperate to tell you about their mortgage deals. Should they learn you’ve had a child, they will try to flog you life insurance. And taking on a dog or cat could see you targeted for pet cover.

Banks do this by monitoring your posts on internet forums and social media.

Experts say their technology chiefs are closely watching developments in the U. S., where customers are increasingly tracked and targeted.

At one U.S. bank, all staff are able to see their customers’ profiles on the networking website LinkedIn, their last ten posts on Twitter and their last ten bank transactions. Staff have this

in front of them when they speak to customers to help them work out what products they could push.

Another big bank found around 7 pc of its customers were active on Twitter, and 1 pc of their tweets were relevant to the bank. executives built a program that would alert employees when their customers shared details about marriage, childbirth, a new job or a new home. The users were then targeted for sales and marketing calls.

‘ That sort of technology is already here in Britain,’ says George Marcotte, from the consultancy firm Accenture.

‘Any digital company is going to look at publicly- available information. What banks are trying to do is match people’s online behaviour with what they know about their behaviour in the real world. ‘There’s potential for selling when they detect somebody who’s going through a life event, like getting married or even adopting a pet.’

RBS says it watches for signs that young people are thinking about buying a house. If they are logged into internet banking and looking at the bank’s online mortgage calculator, it can alert staff.

Banks can analyse billions of pieces of information like this in the blink of an eye.

IT firms now offer an abundance of software that turns this social media tracking into reports for marketing teams. Banks can programme their computers to send out emails and pamphlets automatically to customers highlighted by the research.

or a sales representative might be instructed to make a telephone call to a customer, suggesting a financial ‘review’ in their local branch.

TRACING YOUR MOVEMENTS

THeY can also track you as you walk down the street. Smartphones such as the iPhone, Samsung Galaxy and Sony Xperia can pinpoint your location to within a few metres.

unless you disable the location function, banks can access this data to tell where you are and team up with partners to offer you deals.

As well as improving their databases, it’s another opportunity to make money from you.

For example, RBS — which sells home insurance — sends customers in flood-hit areas a message of support online when they log into their bank account.

The bank says location information is not used to sell products.

Tracking customers is becoming easier for banks because more people use their mobile apps to check their balances and make payments. The American express and Metro Bank apps, for example, try to access your location by default.

And in June, Santander slipped a note into its customers’ bank statements that said it was monitoring their whereabouts.

The note says: ‘Where we hold information about devices you use such as mobiles or tablets, we may use location or other data from these devices.’ The bank says this information is used only to prevent fraud — but it’s also exactly the kind of information that retailers find useful. Mobile provider o2, for instance, monitored its customers’ phones to help cider-maker Bulmers track down 100,000 young men within half a mile of a pub selling its drinks. The company then sent them a text telling them to pay a visit.

Financial companies are starting to latch on to the opportunities. o2 has developed a system that will allow mobiles to ‘ talk’ to your credit card.

Called o2 Travel Alerts, it is being promoted as a fraud prevention service. It allows a bank to check the location of your phone when you use your card abroad.

If the phone and the card are in the same place, the bank will assume your details haven’t been stolen and approve the transaction.

The system is being trialled with credit card provider MBNA, and o2 hopes it will be taken up by many banks before the summer holidays.

o2 says your data is deleted after the check has been made.

Renate Samson, chief executive of campaign group Big Brother Watch, warns it’s only a matter of time before banks begin to exploit the abundance of data available on mobiles.

‘ This sort of activity should make everybody’s blood run cold,’ she says.

ASSESSING YOU FOR LOANS

ANoTHeR chilling development is the use of your computer and mobile phone usage to decide whether you qualify for a loan.

RBS says it can identify good borrowers based on their internet browsing history, which is stored in so-called cookies on your computer.

under an agreement with Google, RBS loan adverts appear next to ‘good’ borrowers’ search results. By contrast, customers deemed risky borrowers will not see the offers.

Many High Street banks are using a firm called Big Data Scoring to pry into your personal affairs. The Scandinavian company searches publicly available databases, tries to work out what model of phone you use and even — if given consent — monitors your Facebook and Twitter profiles.

erki Kert, chief executive of Big Data Scoring, says: ‘ When you go into a bank for a loan, you won’t notice anything different.’

But, he, adds: ‘In the background, we collect vast amounts of data about you, the technology you’re using, your behaviour and maybe the neighbourhood where you live.

‘We use Twitter, Facebook and Linkedin. We’re also scraping the internet, checking your behaviour and what type of devices have been used.

‘We’re tapping into Government databases and local public data.’ Banks are also looking into how to use data from your mobile phone to assess your creditworthiness. They are experimenting with technology that tracks when customers make calls, how often they charge the mobile phone battery and their text message habits. The technology is currently being trialled in Africa but could soon arrive in Britain, experts say. Lenders such as Inventure and Branch.co say that by comparing customers’ mobile phone usage with their borrowing records, they can identify patterns.

For example, in Africa, if someone makes more calls after 10pm it is often an indication that they are more careful with their money — and therefore a lower risk to banks.

This makes sense because call prices are often cheaper in the evening than during the day.

When thousands of different types of information about phone usage are combined, it can provide a surprisingly accurate assessment of how likely someone is to keep on top of their debts.

Will Becker, of credit card comparison website Totallymoney.com, says this technology will soon be adapted for the British market ‘ in one form or another’.