Data allows financial institutions to target personalized offers and enhance the consumer experience, but as cybercrime and online and mobile banking use increase, data privacy has become one of people’s top concerns today.
In a recent study(1), 97% of American consumers said that data privacy is important to them, but over half of these respondents don’t trust companies to ethically use or sell their personal data. However, many FIs are transparent about data sharing and take precautionary and mandated steps to ensure that consumers’ data is protected. Let's discuss the latest data concerns and data privacy best practices for your FI.
Top Data Concerns
More and more consumers are distrustful of how organizations use their data. Financial institutions follow certain data privacy rules, and consumers often sign over some data rights when opening an account or using an institution’s mobile app. In our digital environment, people appreciate the convenience of third-party apps and services that connect to their bank accounts, and many expect these third-party apps to be held to the same security standards as their financial institution. Some users skip or skim the fine print and don’t fully understand the consent they’re giving, so it’s important to clearly communicate with your consumers about these data concerns.
Unfortunately, data breaches can happen, and they’re a major data concern for both financial institutions and individuals. Establishing best practices with your employees can prevent massive harm, and helps to send regular reminders to employees. They should avoid opening emails from unfamiliar senders, encrypt private data, be wary of links, and use secure networks.
If a data breach occurs, it’s important to be as transparent as possible and notify your consumers as quickly as possible. The Federal Trade Commission (FTC) works to protect American consumers, and it suggests that businesses secure all systems, assemble a team of experts, fix vulnerabilities, and notify individuals so they can take the appropriate steps to limit the damage.
Some best practices to communicate with your consumers include installing protective software, using different passwords for different accounts, and closely monitoring your accounts to flag any suspicious activity. It’s also important to remind people that they should never give certain personal financial information over the phone, in order to protect them from scammers.
On a more practical note, every FI should have a process that defines what will be communicated, how it will be communicated, and who does what when a breach occurs. This process, along with a pre-approved draft communication, is crucial to help consumers respond quickly, protect themselves and minimize damages. While no breach is considered a good thing, like any other crisis, it can be an opportunity to demonstrate the values of integrity, care, and empathy.
Data Privacy Rules
Organizations pay to utilize third-party data so they can enhance their marketing campaigns and reach the right people at the right time. People trust banks and credit unions with personal information, but institutions struggle with the balance of leveraging data to benefit their consumers while keeping up with stricter data security.
Some institutions have decided to increase restrictions for third-party data sharing, especially for services that gain access to personal information such as passwords and account numbers. They may encourage consumers to use more of their institutions’ own services instead of connecting outside apps and services to their accounts. Many institutions give their consumers the option to manage third-party access through online or mobile banking so consumers can gain more control over data sharing.
The federal government regulates financial institutions and enforces compliance with acts such as the Gramm-Leach-Bliley Act. The GLB Act protects consumer financial privacy, and it regulates when financial institutions may “disclose a consumer’s nonpublic personal information to non-affiliated third parties.”
It ensures that consumers are given the option to opt-out of information sharing, and any organization that receives consumer information may be restricted on how they reuse and redisclose it.
Data privacy legislation protects consumers from exploitative behavior and gives them the option to limit data sharing. Everyone has to be careful when managing sensitive financial information in a digitized and connected world because our information can be vulnerable when shared. It’s important for institutions to keep their data security up-to-date and regularly communicate with employees and consumers to instill smart data practices.
For more on smart data, visit Prisma’s blog posts for useful data and marketing strategies.
(1) KPMG Survey: American Consumers Want More Control, Visibility Into How Companies Use Their Personal Data
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