Consumers are not giving informed consent before sharing their financial data

Recent revelations highlight the problems that can arise when individuals give consent without fully understanding the consequences
- Dr Edgar Whitley
informed-consent_747x560_Nick Youngson CC BY-SA 3.0 ImageCreator
Nick Youngson CC BY-SA 3.0 ImageCreator

Consumers are not giving informed consent when it comes to sharing their data when signing up to services and apps because terms and conditions are too long and legally complex, research from the London School of Economics and Political Science (LSE) has shown. Despite having concerns about privacy, speed and convenience were overriding factors in deciding whether to sign up to an app or service. 

The research, by Dr Edgar Whitley and Dr Roser Pujadas of LSE’s Department of Management, was commissioned by the Financial Services Consumer Panel and forms the basis for the panel’s call for the government and the Financial Conduct Authority to work together to find an alternative to current terms and conditions in order to facilitate consumers’ genuine, informed consent.

New money management services and ways of making payments - made possible by open banking and recent payments legislation – rely on ‘third party’ access to consumers’ financial transaction data. This creates opportunities for more tailored products or services, but does require consumers to give informed consent.

The researchers wanted to understand how people approach their decision to sign up to new apps and services. Despite it being a legal requirement for companies to obtain an individual’s consent, the researchers found that most of those surveyed did not even read the terms and conditions before signing up, and those that did often didn’t fully understand what they had agreed to.

The findings raise concern both over how companies are informing customers through legally complex terms and conditions, and how consumers are approaching the decision over whether or not to give consent, with the report suggesting a two-pronged approach. 

Firstly, the researchers conclude, more must be done to improve the clarity of terms and conditions  in order to ensure that their presentation addresses the information requirements of customers and is not just seen as just satisfying a legal requirement to notify customers of the legal basis for processing their personal data.  There is also an urgent need to change consumer attitudes so that terms and conditions become a key means by which consumers learn about what will happen to their personal data

Dr Edgar Whitley, Associate Professor of Information Systems at LSE, said: “The revelations about Facebook and Cambridge Analytica highlight the problems that arise when individuals give consent to share access to social media data without fully understanding the consequences of their actions.  Our research found that the concerns were even higher when sharing access to financial data”. 

Dr Roser Pujadas, LSE Fellow, said: “Although people did express concerns about sharing their data, because terms and conditions were seen as being too complicated, we found they instead tended to rely on user ratings or a vague feeling that regulation would protect them. This creates a problem for consumer protection, particularly as technology advances and more of our decisions are carried out through the use of apps and online services. It is vital that changes are made so when consumers consent to share their financial data with a third–party, they are able to do so in an informed way and without being subject to behavioural manipulation”

 Read the full report here

Read the Financial Services Consumer Panel’s recommendations here

Behind the article

For more information, contact Jess Winterstein, LSE Media Relations, 020 7107 5025,