The U.S. is in the midst of a significant transition around personal data that is poised to reshape the financial landscape. Consumer attitudes about data privacy are changing — and the dynamics of power are shifting in their favor.
As sentiments evolve, banks face a critical juncture. Americans increasingly expect privacy and control over their data and banks will need to renegotiate their customer relationships in the service of building greater trust. In the current environment, data-centered and trust-centered approaches may seem mutually exclusive. With intention, however, it’s possible to unify data and trust in a way that helps banks meet the current privacy-conscious moment.
Will History Repeat Itself?
If the best predictor of the future is the past, we can look at the arc of consumer credit information as perhaps a comparable journey.
Thirty years ago, consumers had little insight into their credit standing. Beyond getting approved or denied for credit, they hadn’t much more to go on when it came to understanding the personal factors that influenced this critical financial health metric. Today, it’s entirely different. The access and transparency of credit information has made it a tool for empowerment, with more American consumers actively engaged to understand and manage their credit scores.
Many Americans today feel a similar lack of insight about their personal data. Within this gap, fear, mistrust and even apathy have grown. In TransUnion’s quarterly Consumer Pulse studies, consumers consistently express concerns over the availability of their personal information and the threats this exposes them to. In Q4 of 2023, 78% of Americans surveyed were concerned about sharing their personal information online and with good reason.
Safety First:
The percentage of Americans hesitant to share personal information online:78%
In the same survey, 48% reported being targeted by or becoming victims of digital fraud schemes in the previous three months. It’s reasonable to assume many more were targets without knowing it.
Banks have much to gain, both when it comes to stemming the financial losses of identity crimes and deepening trust with the customers. Taking a page from the credit information playbook, they can look to hand back more transparency and control to customers over their data to achieve greater goals.
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A Value-Based Data Exchange
Data has revolutionized how organizations do business, but it’s becoming clearer that a new force, consumer trust, will play a bigger role in the future. For banks to succeed in the new paradigm, I don’t believe they need to abandon how data can enrich customer relationships.
In line with consumer-centric legislative policies emerging across the country, banks can offer clear and accessible information about how and why data is used, while putting customers in control of data permissions. Instead of collecting data for its own sake, consumers can direct how their personal information is used to enable the personalized experiences they value.
“For banks to succeed in the new paradigm, I don’t believe they need to abandon how data can enrich customer relationships.”
This could include proactive financial advice, tailored products, education, or other relevant financial wellness offerings. In this way, data use can be realigned with both ethical and strategic imperatives.
Particularly when it comes to the potential financial fraud and identity crime that threatens so many Americans, the most reported action taken to protect themselves is no action at all. This inaction has long vexed the financial industry, which most often bears the brunt of the resulting financial losses. Consumer inaction is attributed to laziness, apathy, or hypocrisy — but my own research has led to a different conclusion.
When asked what prevents them from acting, consumers report confusion and overwhelm as major obstacles. Right now, they face a sprawling, perplexing and opaque landscape about their personal data and how it might be misused. The volume of suggestions around maintaining identity security is vast and not personalized for the specific threats that might face a particular individual.
In partnership with their customers, banks have an opportunity to offer personalized security advice that is both data-enriched and permission-based. This approach makes customers much more likely to act, taking proactive measures that better manage their identities and make them less viable targets for fraud. Combining a consent and value-based approach helps the customer see their banking relationship as less transactional and more of a mutual partnership, reinforcing the bank’s position as a trusted organization.
The evolution of credit management provides a valuable example of value-based engagement with bank customers that has resulted in significantly improved financial literacy and wellness — still important goals for banks today.
I believe a consonant, more empowered approach to managing personal data and identity risk is on its way. Today’s intersection of changing attitudes and technological advances provide an opportunity for banks to usher in a new era of informed action that can better protect consumers and reimagine banking interactions in a meaningful way.
Jim Van Dyke is a senior principal, innovation, at TransUnion who has extensively studied the impacts of identity crime. Learn more at transunion.com.