Taking Stock: Data Protection in the Financial Services Industry
Financial planning and management are sources of stress for many consumers. The counsel financial professionals give does not simply affect a person’s finances but also their ability to buy a home, start a business, or make other important life decisions. That is why the relationship between finance professionals and their clients must be built on a foundation of trust. Data management is a fundamental element of trust between finance professionals and the people they serve.
It’s no surprise, then, that in the 2021 Shred-it Data Protection Report 40% of financial firms surveyed believe data security is very important to their company. Fraudsters often target financial services firms because of the high amount of personally identifiable information (PII) they store. If financial organizations do not protect this information, they put their clients at risk of fraud or even identity theft.
Despite the high stakes of data protection in the financial services industry, the 2021 Data Protection Report found that more than half of financial services organizations surveyed have experienced a data breach. In the past year alone, 42% of financial organizations surveyed have experienced a data breach, suggesting that the COVID-19 pandemic has made it easier for bad actors to access confidential data.
This volume of data breach incidents severely impacts all aspects of a financial organization’s operations. IBM’s 2021 Cost of a Data Breach Survey found that the average cost of a data breach in the financial industry is $5.72 million USD ($7.17 million CAD), second only to the healthcare sector. Moreover, data breaches carry a high reputational risk. Almost half (49%) of finance professionals believe a data breach would have a major impact on their reputation. A data breach might only stop a company’s operations for a few days, but its damage to customer loyalty could last years.
Shred-it’s 2021 Data Protection Report found that most financial organizations surveyed feel they are equipped to prevent a data breach. However, financial organizations still have room to improve their data protection protocols. Only 2 in 5 financial firms reported that they perform regular vulnerability assessments, and just 13% of firms have a paper shredding service to help protect against physical data breaches. Additionally, only 40% of financial organizations surveyed have a data breach incident response plan in place, which could affect their ability to contain a data breach and communicate the breach to their clients in a timely and transparent way.
When consumers and businesses consult financial professionals, they want to know that their sensitive information is secure. Improving data protection procedures and investing in an effective data shredding service can ultimately help build trust, save money, and drive customer loyalty. For more information on data protection for financial services, download our Data Protection Report infographic and visit our finance page.