Have you never had security concerns about your money in the bank? If you listen to some people, there is a good reason why they don’t trust banking institutions to handle their money and investments. You might have heard of some stories of war veterans who kept all their money at home because they fear the government could be “lurking” around what they have in the banks. These are not strange stories. Rather, they are a part of the tapestry of a major human concern—that we cannot trust the people, the government who swore to protect our interests.
But how about the finance sector? Do people trust them enough? That depends on how the sector handles data privacy and how they address the issues that come with customer data. A recent survey showed that 33% of financial firms lack plans to address privacy risks, 76% plan to increase their investments in data privacy, and 70% see privacy as a key risk for their businesses. The finance industry understands and recognizes that data privacy is a key issue for customers. Still, many of them lack the necessary security measures to keep customer data private.
How Should This Affect Personal Finance?
A quick search on Google will reveal to you that what people are more concerned about is how their employments can be affected by a lack of data privacy in financial institutions. There were some experiences in the past of employers finding out that an employee filed for bankruptcy. Should this affect that person’s employment? Isn’t it enough that this person had to find a bankruptcy attorney to file Chapter 13 and face the financial woes? Now, this person has to face the prospect of losing a job, too?
But if financial institutions are not careful, it will become easy for information like this to be accessible to those who should not have access to it in the first place. The law is explicit about protecting consumer data, but even major banks have problems protecting their customers’ data. In many parts of the world, especially in developing and underdeveloped countries, banking is still vulnerable to hackers and scammers who steal money and personal information.
The impact of the lack of data protection in the finance sector goes a long way. This is not just about losing money. It’s about losing opportunities to invest that money. Mistrust will lead people away from managing their finances well. Instead of entrusting financial institutions with their hard-earned money, they will keep it in security boxes, vaults, and savings accounts. They will not maximize the opportunities of investment that banks and the stock market present through mutual funds, time deposits, and many other things.
Building Consumer Trust
The finance sector has a deep understanding of what will make customers entrust them with their money. In fact, they identified three factors—privacy risk monitoring, accuracy and maintenance of records processing, and records management and data deletion or retention—that affect consumer trust. In the United States, consumers can ask companies to delete or erase their personal data.
Consumers are aware of their rights when it comes to banking and finance. They might not always be aware of other civil and constitutional rights, but they are accurately knowledgeable of how to protect their hard-earned money. So, when they don’t see financial institutions protect their money, they are quick to back away from them. No one will risk their money on the grounds that a bank lacks security measures. People can risk their money on businesses and investments, but never at the expense of neglect.
Need for Clear Privacy Strategy
Banks and other financial institutions must incorporate privacy into their overall customer retention strategy. Part of a customer’s journey in transacting with them is the assurance that their data is safe and secured. There are two ways for financial institutions to do this. The first one is to give customers more control over their data. The second one is to delete personal information upon their request (for bank account closure, this is extremely important).
Ensuring data privacy will elevate the customer’s experience and journey. This is more than just about complying with consumer protection laws. This is about giving consumers what they want but not at the expense of their personal data. At the end of the day, consumers are willing to share information about themselves as long as they can get something in return—better services, personalized offers, competitive pricing, and discounted deals.