Academic journal article ABA Banking Journal

Privacy. Bigger Than Y2K

Academic journal article ABA Banking Journal

Privacy. Bigger Than Y2K

Article excerpt

Every election season brings cries anew about the evils of "negative advertising." The candidates decry its use, deny using it, and of course allow their strategists to use it anyway. That's because when push comes to shove the ads seem to work.

It's much the same with negative business advertising. The downside to this practice, in the case of banking, is that when one bank targets another in an ad it tars all banks with the same brush. This side effect, however, is subtle, and so these type of ads continue in business and politics.

Unfortunate as that is, it's kid stuff compared to a potentially disastrous extension of the same practice: combining negative advertising with the privacy issue.

Out in the real world banking isn't the genteel affair it once was; bankers look for whatever competitive advantage they can get. And so some bankers we've spoken with have indicated that privacy could be a bank versus bank issue. One of the messages small banks use to set themselves apart, for example, is that "the big banks care more about profits than about customers." That could easily be recast in a privacy context, as, "We'd never sell your personal data to a telemarketer like some of the big banks do." Or, a large bank might tout its own behavior over the shoddy practices of other big banks.

If the industry became divided like that over the degree of banks' commitment to privacy, the downside wouldn't be at all subtle. Customers would become confused, and politicians, consumer activists, and the media would have a field day.

When ABA President Hjalma Johnson in December challenged bankers to develop a formal privacy policy in the first 100 days of this year, he wasn't talking to one size of bank over another. What he said was direct: "Privacy is the cornerstone of banking, the heart of our relationship with customers."

The great danger is that while bankers will agree with that statement as a matter of principle, in practice they--and by "they" we mean not just CEOs, but employees working in the trenches--will stray from that high ground in the daily heat of battle.

Finding the right balance between collecting and using information about a customer in a way the customer would appreciate--better designed products and more targeted offers, for example--and abusing or misusing customer data is a significant challenge, because each customer may have a different sense of what is appropriate. …

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