News that Facebook is to introduce a crypto currency has put banking regulators worldwide on red alert.
On the surface, the move by tech giants into financial services is good for customers. Transaction times should be faster and service charges lower, a particular advantage in developing economies.
However, their track record on data protection and digital privacy is pretty poor.
As a result, there is growing customer concern about how personal information is used. Undaunted, Facebook says Libra’s goal is to set the standard for global digital identities.
Banks are therefore bracing themselves for further regulation that demands improvements to data privacy protection across the industry.
A tried and tested way for financial services providers to demonstrate they take customer privacy seriously is to use encryption-based tools like virtual private networks (VPNs) to protect personal data at all stages of the communications process.
Tech Giants Move to Disrupt Financial Services
In June, Facebook announced plans to launch a crypto currency service next year. The service, called Libra, will offer Facebook’s 2.7 billion customers the chance to pay for things or settle accounts.
Other firms such as Amazon, eBay, Google and Paypal are also providing digital financial services.
The enormous pool of lifestyle data held on its platforms should make it relatively easy for Facebook to determine risk and reduce the need for credit checks or collateral to approve transactions.
Technology firms’ low overheads allow them to scale up financial services easily. This makes them ideal for emerging economies where large sections of the population have never used a bank.
Breaches Dent Consumer Confidence
Weighed against these positives is the low opinion consumers have for big tech when it comes to looking after their data.
A RSA study in 2018 featuring 7,500 participants revealed 73% were more aware of data breaches than in the past.
Around 80% felt protective of banking and financial information while 74% were concerned about money being taken from their accounts without their knowledge.
More than half (54%) claimed they would be put off from buying services from a company that mishandled data.
However, half (50%) admitted they were more inclined to trust companies who take data protection seriously with their money.
Stronger International Regulation
Consumer distrust is rooted data scandals like Facebook Cambridge Analytica and Equifax that leaked the personally identifiable information (PII) of millions of people.
In consequence, financial regulators are setting more rigorous standards.
Everyday activities like mailshots, providing a more personalized service, or managing customer relationships involve sharing a tremendous amount of personal data.
Reliance on data is set to intensify as banks adopt new tools and technologies to harvest information from unstructured sources such as third party databases or social media.
Authorities are responding by insisting banks maintain the highest data protection standards to minimize the risk of data being collected and used without consent.
Facebook wants its Libra service to set the standard for digital identities. Standards bodies like the Bank for International Settlements (BIS) have given the Libra initiative a cautious welcome for its potential to offer customers payment services on a global scale.
However, there are also concerns that big tech’s entry into financial services will quickly raise competition and data privacy risks that go beyond the scope of current regulations.
Standards bodies are expected to work together to close any loopholes in international rules governing competition and data privacy so that all financial services organizations have a level playing field.
Data Privacy Starts with Encryption
A good start for financial services providers wanting to demonstrate their commitment to data privacy is to implement end-to-end encryption for all digital communications.
In this way, tools such as VPN software can protect personal data as it passes over the public Internet by shielding it from any passing attempt at surveillance.
Enterprise-grade VPNs can manage and protect the privacy of remote connections for all platforms.
They can also scale up easily to meet the needs of a large, expanding user base.
VPNs are almost certain to have a central role in meeting regulatory requirements for protecting digital identities in the new era of socially driven international banking services.
In summary, as new digital banking services come on stream the pressure will build for these and existing financial providers to conform to more rigorous data privacy protection standards.
Encrypted connectivity allows financial organizations to demonstrate their readiness to keep their customers’ sensitive personal data private.
A professional, enterprise-grade VPN is the ideal security technology for emerging international digital financial services suppliers.
A VPN allows them to comply with universal standards while delivering financial services in complete privacy to remote customers all over the world.
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