UK Privacy Laws May Slow Outsourcing to India

In the fight against outsourcing, there are no economic arguments that bear much scrutiny. A company in pursuit of maximum shareholder value has an inherent interest in cutting its wage bill, and if people in Bangalore are capable of doing the same job for less money than people in Birmingham, away go the jobs. But, there are externalities to that shift that a civilized nation must address. Dealing with the worker who loses his job is not easy, but it is possible (assuming the person is young enough and talented enough) to retrain for something better. But what about the consumer, who is not only getting lower prices out of the deal, but who is also losing his privacy?

Lloyd’s TSB is one of the many companies that has discovered that there are people in India who speak English quite well, and therefore, it can consider outsourcing much of its back office operations and customer care. To do so, though, it must make certain information available to those would-be workers. Names, addresses, account numbers, and the like, must be accessible to the Indian staff, and that means that there is a transfer of sensitive personal data outside the European Economic Area (the EU plus a few small countries that don’t take all their direction from Brussels.

However, under European law, it is illegal to transfer such data without the express written consent of the consumer. The bank’s union is challenging the company policy and is using the rather grand law firm of Bindmans to prove that India’s data protection law is not up to European standards. An unnamed consumer appears to have weighed in as well. Thus far, an information commissioner is looking into whether Lloyds TSB is doing as required under the Data Protection Act.

This shift in approach is significant because the objection here is not an economic one but rather is a matter of personal privacy. In a world of identity theft, terrorists with false papers and general paranoia, the bank has a big public relations problem on its hands even if, as one suspects, it is doing exactly as it should with regard to personal information about its customers. One can envision a competitor deliberately setting up a customer care center in the UK and running the ad, “Your information stays here.”

Lloyds said in a statement regarding the issue, "We are confident that we comply with the Data Protection Act and our customers can be reassured that their personal information is as protected in India as it would be in the UK." Call it racism, or provincialism, or plain stubbornness, but one doubts that the second half of that statement is going to be an easy sell. All it takes now is for the consumers to get upset, and Lloyds TSB may have to cut staff in India.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


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