It was just less than a year ago (although the last six months have seemed more like six years) that The Financial Brand had this to say about banking and privacy. They pointed to an Accenture survey that found that “20% of banks monetize transaction data by delivering actionable insights and that 75% aspire to do so in the next three years. The consulting firm, which encourages financial institutions to pursue this strategy, also notes that monetizing consumer data is difficult to do well while also protecting consumers’ information.” The survey, according to the FB, also went on to predict that as banks explored this uncharted territory, they must tread lightly to protect the integrity of customer relationships.
How true that is.
I think it might have been one of those satirical commercials done by Saturday Night Live a while back, I’m not sure, but what I do remember was their lampooning of banks using personal data for marketing purposes. At one point in the faux commercial, which featured a young couple, the young man receives a series of SMS messages from their bank. The messages are fairly innocuous at the start but become progressively more disconcerting. The first text seems ordinary enough: “We hope you’re enjoying the new truck you purchased with one of our auto loans.” When it’s followed shortly afterward by, “we’ve noticed that you made a large purchase at the grocery store just the other day… having a party?” the couple gets a bit concerned. By the last, they’re totally creeped out: “We have the loan you need when you’re ready to decorate that baby room. Congratulations.” The gag, of course, is that the couple doesn’t know they’re pregnant, yet their bank somehow does.
Granted, this is a bit of hyperbole, but it does point to the fact that monetizing consumer data can pretty quickly run afoul of the consumer’s desire for privacy. Consumers want the convenience of products and services being brought to their attention based on their “buyer journey” and purchasing habits, but they’re definitely conflicted about how much of their personal information is needed to make that happen.
That’s challenge number one. The other is that Congress is not helping the matter. In the ABA Banking Journal blog, “How will increased privacy regulation affect bank marketing? author Karen Hoffman talks to the challenges that the industry faces in the area of privacy. “Consumers complain,” Hoffman says, “that their personal privacy is not respected, but often freely share sensitive information when it suits them, especially in the interest of receiving more personalized products, services or marketing. Hence, financial marketers find themselves in a pointed Catch-22 in marketing: hoping to connect in a personal way with customers or prospects, but unable to overstep certain boundaries that would transgress emerging privacy regulations.”
The challenge for banks is twofold. One, how do they walk the privacy tightrope, using just enough personal data to market products without frightening customers and two, how do they navigate a hodge-podge of regulations? As Hoffman points out, “the big challenge is the emerging patchwork of state-by-state privacy regulations and enforcement. While many are similar in nature, each has its own definitions of personal data, rights under the law for consumers and operational impact. An institution that operates across 20 states may be looking at 20 different frameworks and bills applying to them and their accounts, some of which are potentially in a state of revision.” Also, while many state-by-state privacy regulations and enforcement are similar, each has its own definitions of personal data and rights under the law for consumers.
As banks continue to move their services online, the issue of privacy will continue to receive greater attention. How big an issue is it? Opinions vary from “proceed with caution” to “don’t worry, consumers will give you whatever you want if you give them what they need.” While there seems to be differing opinions on the scope of the challenge, and with that a bit of uncertainty on how to proceed, one thing is for certain; your bank shouldn’t be the one to tell you that you’re expecting!
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