Financial privacy
Encyclopedia
Financial Privacy is a blanket term for a multitude of privacy
issues:
Debates on the first sense of the phrase have many different points of view, from crypto anarchists
who want to create a completely decentralized and anonymous banking system, to others who support enhancing the power of the government to find financial information in order to fight terrorism
.
However, the majority of the debate in the United States
involves the second sense of the phrase. The same anger against telemarketers which led to the United States National Do Not Call Registry
also was focused on what some alleged to be the source of many of the telemarketers leads: financial institutions selling things like balances and transaction information to telemarketers. Financial services
companies, those that offer both banking, insurance
, and investment
products however say that the issue and attempted legislation on the topic was brought on by smaller financial institutions who simply focused on one type of product or business. The reason for this is that combining all those products with one company creates a Wal Mart style economies of scale
and other synergies which are difficult to compete against as a single product line company. By putting forth legislation which forbids financial institutions from sharing information with other companies, single-product-line financial institutions could cripple integrated financial services companies because of the technicality that the banking, investments, and insurance parts of the business had to be operated under separate company affiliates within a holding company. Most financial services companies claim that they never had sold information to non financial services companies. Some critics of financial institutions agreed with this analysis but continued to press for the legislation because they believed that the financial services integrated business model
was fundamentally wrong; however the vast majority of critical articles focused on the issue of selling information to outside telemarketers.
Privacy
Privacy is the ability of an individual or group to seclude themselves or information about themselves and thereby reveal themselves selectively...
issues:
- Financial InstitutionFinancial institutionIn financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries...
s ensuring that their customers information remains private to those outside the institution. Issues include the Patriot Act, and other debates of privacy vs. security.
- The term is also used to describe the issue of financial institutions selling customer information to other companies so that those companies may use that for marketingMarketingMarketing is the process used to determine what products or services may be of interest to customers, and the strategy to use in sales, communications and business development. It generates the strategy that underlies sales techniques, business communication, and business developments...
, and especially telemarketingTelemarketingTelemarketing is a method of direct marketing in which a salesperson solicits prospective customers to buy products or services, either over the phone or through a subsequent face to face or Web conferencing appointment scheduled during the call.Telemarketing can also include recorded sales pitches...
purposes. This issue however is mixed with the issue of financial institutions sharing information within themselves, which could be considered "sharing information between companies" or "affiliate sharing" since a financial institution is not allowed to be one company for regulatory reasons, but instead must assume a holding companyHolding companyA holding company is a company or firm that owns other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself; rather, its purpose is to own shares of other companies. Holding companies allow the reduction of risk for the owners and can allow...
structure. This sense of the word has been the main issue debated in the United States during the 21st century.
Debates on the first sense of the phrase have many different points of view, from crypto anarchists
Crypto-anarchism
Crypto-anarchism expounds the use of strong public-key cryptography to bring about privacy and freedom. It was described by Vernor Vinge as a cyberspatial realization of anarchism. Crypto-anarchists aim to create cryptographic software that can be used to evade prosecution and harassment while...
who want to create a completely decentralized and anonymous banking system, to others who support enhancing the power of the government to find financial information in order to fight terrorism
Terrorism
Terrorism is the systematic use of terror, especially as a means of coercion. In the international community, however, terrorism has no universally agreed, legally binding, criminal law definition...
.
However, the majority of the debate in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
involves the second sense of the phrase. The same anger against telemarketers which led to the United States National Do Not Call Registry
United States National Do Not Call Registry
The National Do Not Call Registry is intended to give U.S. consumers an opportunity to limit the telemarketing calls they receive. To register by telephone , consumers may call 1-888-382-1222. The registry was set to begin in 2003, but a court challenge delayed its implementation until 2004. The...
also was focused on what some alleged to be the source of many of the telemarketers leads: financial institutions selling things like balances and transaction information to telemarketers. Financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
companies, those that offer both banking, insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
, and investment
Investment
Investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain, that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time...
products however say that the issue and attempted legislation on the topic was brought on by smaller financial institutions who simply focused on one type of product or business. The reason for this is that combining all those products with one company creates a Wal Mart style economies of scale
Economies of scale
Economies of scale, in microeconomics, refers to the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased. "Economies of scale" is a long run concept and refers to reductions in unit...
and other synergies which are difficult to compete against as a single product line company. By putting forth legislation which forbids financial institutions from sharing information with other companies, single-product-line financial institutions could cripple integrated financial services companies because of the technicality that the banking, investments, and insurance parts of the business had to be operated under separate company affiliates within a holding company. Most financial services companies claim that they never had sold information to non financial services companies. Some critics of financial institutions agreed with this analysis but continued to press for the legislation because they believed that the financial services integrated business model
Business model
A business model describes the rationale of how an organization creates, delivers, and captures value...
was fundamentally wrong; however the vast majority of critical articles focused on the issue of selling information to outside telemarketers.
See also
- Bank secrecyBank secrecyBank secrecy is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply...
- Right to Financial Privacy ActRight to Financial Privacy ActThe Right to Financial Privacy Act is a United States federal law that gives the customers of financial institutions the right to some level of privacy from government searches. Before the Act was passed, the United States government did not have to tell customers that it was accessing their...
- Financial cryptographyFinancial cryptographyFinancial cryptography is the use of cryptography in applications in which financial loss could result from subversion of the message system.Cryptographers think of the field as originating in the work of Dr David Chaum who invented the blinded signature...