12 September 2005

The Paradox of Privacy...

The banking industry has much to do to overcome the flat curve for new online customers. If this latest Ipsos Insight Research is correct, then privacy remains a significant issue in the consumers mind.

The proliferation of "phishing" and highly publicized hacker tactics have thwarted industry efforts to convince customers that online banking is safe. Results of the survey include:

83 percent of survey respondents who conduct their personal banking online reported concerns over protecting their personal information from theft.

73 percent of people said personal information theft is a deterrent for them to use online banking survey respondents were equally concerned about banks selling their personal information to a third party, with 72 percent of respondents citing the issue as "extremely" or "very important."

Promising not to sell your information to third parties is only part of the problem. The financial institutions are still using direct marketers and other data mining companies to make sure their latest loan offer goes to the most qualified and relevant customer. In some cases, the banks are doing much of the analysis in-house and only sending the "Bulk Mailers" the correctly correlated data records.

This New York Times article, Europe Zips Lips; U.S. Sells ZIPs, by Eric Dash sums it up quite nicely:

One thing that both privacy cultures have in common is that it is becoming harder for either to control what is and isn't kept private. Information is increasingly the lifeblood of the global economy, not to mention the global fight against terrorism and the quarry of hackers.

As this year's data breaches and compromises have shown, no one really knows how safe the world's vast pool of confidential data is, and therefore how protected anyone is against an invasion of data privacy.

Mr. Reidenberg, the law professor, compares the current situation to the stock market meltdown after the 1929 crash. America responded then by creating the Securities and Exchange Commission and a host of financial disclosure and accounting reforms. The need to safeguard sensitive data, Mr. Reidenberg said, "will necessitate the United States focusing on the legal way we structure information processing, just like we needed to do in the 1930's to put the economy back on stable footing."

With Identity Theft and Money Laundering as the two top issues with almost every banking institution, you would think that these 3rd party mailers would be consistently monitored and audited just as the banks are. Nothing could be farther from reality.

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