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Significant Challenges for Financial Services using Social Media

Identify Theft

Financial services are in difficult place when it comes to adopting social media as part of their communications strategy.  This is primarily due to the risks that social media can represent to them i.e. regulatory, reputation and operational risk.

While banking, insurance, pension and investment companies are seeking to earn or re-gain the trust of customers; the customer is less persuaded by traditional marketing methods and more inclined towards networking and social channels.

And there lies the first major challenge: customers want to use social media such as Facebook to transact and yet Principle 8 of the Data Protection Act states that:

“Personal data shall not be transferred to a country or territory outside the EEA unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data”

The issue for financial services is that Personally Identifiable Information (PII) captured on Facebook sits on a US server. So the scenario might be that in order to make sure that the company is dealing with the right person, they ask the customer for their bank account number or perhaps a policy number (both are examples of PII) and then this data would sit on a US server via Facebook.

The issue is of course is potential identity theft which could allow someone to access the account of the person who has supplied the PII which in turn could expose the financial institution to reputational risk if they were seen to be negligent.

I found the following infographic (thanks to chargebacks911.com) which although US based gives a perspective on the growth of identity fraud.

CB911IdentityTheftInfographic

The result of this is that the financial services sector are responding more slowly than customers would like.  Even then however some organisations with different attitudes towards risk are taking a more lenient view than others possibly arguing that the opportunity to gain market share is a chance worth taking.

 

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