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Financial Follies - Between a Rock and a hard place

Identity theft has increased almost tenfold since 1999 according to Government figures, and is expected to exceed 100,000 during 2007, not taking into account the potential fallout from the loss of 25 million people's personal data. A loss of that order could lead to meltdown on a scale only hinted at following the Northern Rock debacle, except it won't, bizarrely.

According to the British Banker's Association, the identity theft implications from the mishandling of the Child Benefit database has not resulted in a panic response, despite new research showing that almost a quarter of Britons do not trust any type of financial services provider since Northern Rock's near collapse.

The 'Financial Services Trust Index' commissioned by financial specialist agency Teamspirit in the wake of the Northern Rock incident showed that less than half of the general public considers high street banks to be trustworthy, with only one in four declaring confidence in the internet banking system.

Trusted influencers

Kevin Scott MD at Teamspirit Edinburgh, who work with YouGov twice a year tracking trust in financial services providers, says that trust continues to be an issue. However, he says that whilst trust in many types of providers and institutions is declining generally, he doesn't believe that people don't trust institutions as a rule; it is how they trust which is different.

"People no longer simply defer to these institutions, instead they also refer to any number of a whole range of trusted influencers. Independent sources on the internet, for many, is one such influencer but the challenge for institutions is to know how to tap into this increasingly fragmented picture which is an area we at Teamspirit are particularly involved in."

But how can this trust be transferred across all areas of banking, in light of the recent high-profile problems?

"The key driver for generating on-going customer trust and loyalty is a blend of exacting customer service standards combined with highly relevant, targeted customer communication," says Avian's client services director, Scott McCallum. "Where several years ago banks were removing all authority and decision making from the high street, forcing everyone to use foreign call centres, closing branches, the smarter operations have now woken up to the fact that this was a mistake.

"It is paramount that banks provide what customers want rather than telling them what they can have, whilst demonstrating over time that advice given and products purchased were relevant and of benefit to the customer. In the long terms this will bring back trust to a market sector that has made a rod for its own back with historic high charges and lack of transparency."

Financial advice

Joanne Parker, chief executive of Teamspirit, argues that the loss of trust in the finance and banking sectors varies amongst providers.

"What we could see is an increase in consumers visiting firms with a reputation for personalised service and tailored financial advice," she says.

However, this scepticism did not translate itself into action when news of the Government's data loss emerged, perhaps because the public did not directly associate the loss with its own bank. The message that their funds are safe has evidently filtered through.

"No matter what happens, and whoever ultimately picks up the tab for all of this, the customer shouldn't worry because they will get their money back," says Lesley MacLeod, communications director for the British Banker's Association. She says that, despite the provocation, the possible financial uncertainty has not manifested itself into public action.

"There has been absolutely no evidence that customers have panicked. On the day after the crisis broke there was a small increase in the number of calls through to banking call centres, but by lunchtime it was back to normal volumes. There were no queues in the branches, nothing. By and large people feel their money is quite safe."

Incredibly vulnerable

McLeod believes the recent data loss fiasco may not have resulted in a similar level of panic because there was no visual trigger inciting the public fear.

"More likely because there weren't pictures of people queuing," she says. "Northern Rock was a picture driven story, in terms of the panic. People were afraid that it was their money and Northern Rock was going to go bust."

Jack Irvine of Mediahouse PR, whose clients have included several large financial institutions, believes that the confidence of the public in the Government is misplaced.

"We are now incredibly vulnerable because of the way data is collected. Some of the smartest business men I know do not ever put their most sensitive information into a computer," he says. "Most ordinary punters don't have that choice."

He argues that the public lack of confidence shown during the Northern Rock aftermath is well founded.

"The taxman is using consultants, which means your private information is being given to companies other than the Inland Revenue. The minute it goes into a databank somewhere, anyone can get it," he says.

"The more data you produce, the bigger risk there will be that it will go adrift and fall into the wrong hands."

The banking and finance industries seem to have dodged a bullet. The implications of the loss of the personal data of 25 million people are staggering, and are almost certain to resonate for years to come. By issuing only generic security advice, they have allowed the public the comfortable perception that the recent hiccups are unlikely to have a negative impact. Whether that proves to be correct remains to be seen.

Featured by The Drum

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