For Financial Institutions, Identity Theft Protection is a No-Brainer
by Bryan Ansley
Financial institutions can do more to protect consumers from identity theft. According to a recent CA Inc. study, only 8 percent of U.S. consumers say that financial institutions and other businesses adequately protect their personal data. The same study revealed nearly 80 percent of consumers have lost trust in banking and government institutions due to the frequent data breaches in the news.
Victims of identity theft can expect to spend as much as 600 hours of their own time cleaning the mess left behind by fraudulent medical and utility bills, defaulted mortgages and rental contracts, according to the FTC. And that doesn't include the stress of dealing with creditors and the expense into the thousands of dollars of trying to put their lives back together.
What are financial institutions doing to quell their customer's identity theft fears? Over the past several years many financial institutions have stepped up efforts to thwart online attacks like phishing. Additionally, there has been a vast deployment of security technologies that authenticate and verify identities. There is also a big push in the financial services industry to educate the consumer on ways they can mitigate the risks of identity theft and make themselves less of a target. However, more must be done.
A financial institution will add value to its offerings, drawing new and retaining current customers, if it is willing to take the steps needed to go beyond a minimalist approach to defending against identity theft. According to a recent Unisys corporation survey, 50 percent of households would switch their bank for better identity protection. Obtaining the best identity theft security measures is definitely in a financial institution's best interest.
Nevertheless, with the current credit crisis, financial institutions have their attention focused on their survival, not on customer identity theft solutions. According to David Jevans, Chairman of the Anti-Phishing Working Group, looking at pure financial losses, institutions are writing down billions these days in defaulted loans; $10, $20 or $50 million dollars in phishing and other identity theft write-offs is obviously below the radar.
"But looking at brand reputation and consumer trust in financial institutions and in banking online, that is where it is very difficult to compute losses," said Jevans. "And so we find a lot of financial institutions are very much concerned about the problem, as much from a confidence perspective and brand protection of their reputation, as they are from a financial losses perspective." Aside from brand protection, other factors are forcing financial institutions to focus efforts on identity theft protection for customers. In late 2007, the Federal Reserve issued the Red Flag Rule, which requires all financial institutions to conduct an identity theft assessment of their organization and, based on those findings, implement policies and procedures to mitigate the risks.
Throughout 2008, financial institutions have been reaching out to third-party vendors that specialize in identity theft for anti-fraud services and technologies. Those Red Flag regulations go into effect this November. Hence, all safety measures must be in place. If no action is taken, non-compliant financial institutions will face potential sanctions and monetary penalties.
Although financial institutions are under the gun to adhere to the new regulations, improving and establishing stronger identity theft protection measures will retain and grow new customers, along with reinforcing the bottom line. According to financial institution consulting firm Celent, growing profitability now requires banks to focus on customers more than products, and to grow balances and fees while lowering their costs to serve.
Adding more identity theft protection to the line-up of offerings will only increase value in the eyes of the customer, which translates into more money for the financial institution. Customers, the government and the financial institution's bottom line are demanding full-fledged identity theft solutions. The time to act is now.
Secure Identity Systems is the only company in the U.S. that offers the end-to-end solution for Red Flag compliance including: Initial Risk Assessment, Policies and Procedures Manual, New Account Authentication, Change of Address Verification, Identity Theft Protection with fully managed recovery, On-site Staff Training, and an Anti-Phishing Program. For additional information, please call (615) 377-7661, or e-mail: firstname.lastname@example.org.
First published on BankersOnline.com 8/18/08
First published on 08/18/2008