As part of digitization, banks and other financial institutions are getting digitized with the help of document conversion services. This is with a view to improve speed of transactions and overall efficiency and also to achieve a competitive edge. However, banks are facing a major challenge from web-based services such as Mint, Personal Capital, Venmo and Yodlee that offer to collect customer data from financial institutions promising to help customers better manage their money, pay their bills and make sure that they are well-prepared for retirement.
According to reports from American Banker, the New York Times, and The Wall Street among others, major banks are now restricting such web-based services from accessing their customers’ information due to concerns such as privacy of customer financial data and the security of the information. Some banks have also asked to pay for accessing the data. To counter this, these web-based services are trying to draw attention to who owns the data. If the banking information belongs to the customer and not the bank, customers should be free to share it with the web-based service to enjoy their services.
The customer is caught in the middle in this ongoing tug of war between banks/financial institutions and web-based services. If interested in using such services, you must be very cautious. So here are some facts to consider when allowing a web-based service to access your information.
- Before committing to a web-based service, study their privacy and security statements. These services may use state-of-the-art methods to protect your information which keeps changing. However, even the most conscientious companies can find their system hacked and compromised. Companies like eBay, Home Depot and even IRS have been victims of data breach. Therefore, even the banks may be prone to attack. So the more computer servers your information resides on, the greater the potential opportunity for your financial information to be lost or compromised.
- Decide whether a particular service is worth the price you have to pay. You have to take into account the security risks as well as the possibility that other financial providers (that may be related to or not) to your partnering provider, may start marketing their services to you.
- Regularly check up your account balance and review all transactions made. If your username and password are stolen, you may know if it before the financial institution in question does. It is most likely that your bank accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation, which is quite a relief.
- However, if your brokerage account is hacked it is more difficult to regain it. When member brokerage firms fail, protection is typically offered by the Securities Investor Protection Corporation. However, they may not offer protection against hacking because they advise you to contact your brokerage firm, the FINRA, the SEC, your state securities regulator, and/or law enforcement authorities. Also, take sufficient precautions to keep your financial data safe and secure in your home computer or laptop or other electronic devices.
There is a battle between banks and web-based services for customer data but it is the customer who decides which on to choose. Banks are calling for new data agreements so that technology companies can be stopped from gaining access to customer data and creating possible security risks. The problem is that few rules/standards are there for how new technology companies can use the data collected from customers. This could create confusion for customers and lead to grave security risks. It is also not very clear as to who would be held liable if a data breach at a service such as Mint or Venmo led to financial losses for a customer. As of now, the customer is the person who can decide whether or not to share their information with web-based services.