Silver Lining in Red Flag Rule: Bankers Can Generate Revenue and Increase Customer Satisfaction
by Bryan Ansley
With the November 1st regulation deadline right around the corner, many banks are still not prepared to comply. According to an Information Security Media Group survey, 50 percent of U.S. banking institutions are not ready to meet key provisions in the Federal Reserve's Red Flag rules. Over the next several weeks, financial institutions will scramble to reach total compliance or face potential sanctions and monetary penalties. Under the new regulation, institutions are required to implement identity theft protection programs including "reasonable policies and procedures" for preventing identity theft and the ability to track "red flag" activities and notify victims. As a number of banks search for quick fixes to address the Red Flag Regulations, others are taking a more holistic approach and finding the silver lining. Now is the perfect opportunity to supplement service offerings with identity theft protection packages in order to ensure their customers' privacy. However, institutions that take the approach of patching together short-term solutions in the long run will incur more expenses and put their bank and customers at risk.
The financial community can literally save the day by implementing policies and procedures that make safeguarding a customer's identity a top priority. Banks choosing the holistic route can implement high-tech tools to mitigate and deter identity theft damage to the victims. Services like new account authentication, change of address verification, anti-phishing detection, take-down programs and identity monitoring solutions are just some of the key aspects of a total fraud prevention package.
Fee Income Opportunities
New compliance regulations traditionally have always meant additional direct and indirect costs. With institutions largely struggling at present, now may not seem like the best time to add additional regulatory burdens. While on the surface, the new Red Flag regulations may seem like yet another exercise in burden shifting, but it is in fact a real opportunity for financial institutions to improve customer satisfaction, increase retention and generate additional fee income. According to a new CA Inc. study, only 8 percent of U.S. consumers say financial institutions and other businesses adequately protect their personal data. Likewise, a Unisys corporation survey found 50 percent of households would switch banks for better identity protection. By implementing policies and procedures required to make safeguarding a customer's identity a top priority, banks can immediately add value and increase non-interest income.
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 9/29/08
First published on 09/29/2008