To Serve and Protect is a phrase made famous by the Los Angeles Police Department and adopted, in various forms, by law enforcement agencies across the United States. In today’s rapidly evolving regulatory and technology-driven financial landscape, the banking industry needs to adopt the serve and protect mindset.
A recent study conducted by researchers from New York University and Carnegie Mellon University reveals the impact account overdrafts has on consumers and how banks can address this growing problem, retain customers and increase revenue. According to the “Analyzing Bank Overdraft Fees with Big Data” report, consumers tend to disregard potential consequences when they spend or withdraw from their checking account due to impulsive spending habits. And because of high monitoring fees or banks that may charge for statements or balance checks, they don’t track their account balances as closely as they should. The result is often an overdrawn account and an unhappy customer. The study found that when consumers incur what they see as unreasonably high overdraft fees, they tend to become dissatisfied and leave their bank. Leveraging the power of data and predictive analytics can offer a more viable solution to managing overdrafts. By harnessing the treasure trove of data banks have available, they can identify consumers who exhibit certain behaviors, such as overdrafting, and offer alternative pricing strategies, i.e., fixed bill schedules and overdraft waiver programs – increasing bank revenue while improving consumer welfare. That is just one example of how banks can make the best use of technology to serve their customers. Mobile banking, real-time account alerts, social media outlets, and self-serve kiosks that expedite the time a consumer spends in-branch are all ways to more efficiently and effectively serve customers.
As one of the world’s iconic superheroes said, “With great power comes great responsibility.” The amount of data that banks safeguard empowers them to use that data for the good of consumers. They also have a responsibility to protect it. One of the world’s largest credit reporting agencies is a prime example of what happens when financial firms fail to protect the finances and data consumers entrust to their care. Just a little over a year after Equifax disclosed the breach that impacted 148 million consumers, a House Oversight Committee report has revealed that the breach would likely not have happened if the credit reporting firm had followed basic cyber hygiene. According to the report, Equifax failed to modernize its technology, failed to patch its systems when vulnerabilities were detected, and stored sensitive data on out-of-date and sub-par systems.
Financial institutions and organizations owe it to the consumers they serve to take all reasonable measures to protect their data and their networks from potential breaches. Some basic measures firms can take to forge a line of defense from attacks include:
- Requiring all employees with access to personal information to use strong passwords
- Restricting employees’ access to personal information to a “need-to-know” basis
- Training employees on basic cybersecurity measures and taking precautions, such as learning how to identify scams and not falling for phishing emails
- Using multi-factor authentication for remote access to personal information
- Updating software and operating systems with the latest security patches
The challenge those in the financial industry face is striking a balance between serving and protecting. But for the sake of economic stability, the businesses and communities they serve, and the welfare of consumers, they must do both.
As you approach the New Year – the time to reflect back on the past year, lessons learned (some the hard way!) and what the future holds – resolve to take whatever steps are necessary in the coming year to both serve and protect your customers.
Copyright © 2018 Bankers’ Hotline. Originally appeared in Bankers’ Hotline Vol. 28, No. 12, 12/18