In the age of oversharing, privacy no longer exists. From what we eat for breakfast to when we sleep and all the minute details in between, many of us choose to divulge a bounty of personal information through our social media activities.
But our biggest privacy issue is not that we are choosing to share too much information, but that most of us have no idea what information we're sharing and with whom. Consumers passively and unknowingly provide corporations with personal data when they use mobile applications, slap on a fitness device, surf the web or shop online. During a recent industry conference, a presenter told the story of a man who learned of his wife's affair only after 16 other application vendors knew. The companies had access to phone data that tracked his wife's location to another man's home. Through a wearable fitness device linked to her smartphone, the companies knew her heart rate rose significantly for a 28-minute period — all whilst the husband was out of town.
The financial industry stands to benefit greatly from data mining by leveraging the information to tailor and personalize their communications with customers. MasterCard, for example, announced in mid-October that it had entered into a two-year agreement to mine Facebook user data in the Asia-Pacific and sell that information to banks, which will in turn use the data to make customized online offers to MasterCard customers.
In theory, this is a win-win for banks and consumers. Banks can strengthen their relationships with customers and potentially increase revenue via highly targeted product offers, while customers receive more relevant marketing messages from their banks (and perhaps get better deals). Unfortunately, the process by which companies obtain customer data is broken.
Who isn't guilty of quickly scrolling through long, complex privacy policies and checking the box next to "I agree to these terms" without having any idea what the terms stated? We have to click "yes" to get access to the services we want, and we typically do so without understanding the implications. It was recently mentioned at a privacy conference that a team of seven attorneys spent seven days trying and failing to decipher the iTunes privacy agreement. Moreover, some user agreements are written in such a way as to deter comprehension.
Consumers are growing increasingly wary about how they're being tracked. When the details about how companies like Facebook, Amazon and eBay use customer data are made more clear, the general public may stop agreeing to give their privacy rights away. It won't be long before the masses start pushing for regulations that require companies to draw up privacy policies that can be read and understood by the average consumer.
As the financial industry scrambles to monetize big data, it would be smart to keep in mind that these troves of information might not be so overflowing in coming years as these inevitable shifts take place.
Financial institutions in the U.S. should be aware of the possibility that the government will implement opt-in spam laws, which have already been enacted in Canada and the United Kingdom. These laws require companies to receive express consent from customers before reaching out to them electronically. Firms can no longer bury the unsubscribe button or add people to their email lists simply because of a pre-checked box on an online form. Customers must take positive action to provide consent and receive content.
Should opt-in spam laws become the rule in the U.S., banks will have to create secure communication methods that educate customers about the importance of receiving their communications. Email will not be a viable option; consumers are becoming more aware of phishing and other scams and do not trust email as a secure way to communicate with their financial institution.
Customer data can provide benefits to both banks and the general public. But financial professionals must change the way in which we obtain information or risk losing access to it all. Consumers deserve to have more control over how their data is mined, shared and stored.
Stuart Lacey is the founder and chief executive of the know-your-customer compliance technology provider Trunomi. Lacey is also a member of the Young Presidents Organization and Young Entrepreneurs Council.