December 5, 2016

The Impact of Identity Theft on Businesses

It's commonly thought that identify theft is something that only impacts customers, and therefore it is primary customers themselves who should be concerned about the security and integrity of their private and personal information. But this is overly-simplistic: every identity theft issue is bigger than the customer, and goes directly back to their bank or lending institution. Typically, that results in big costs to banks and credit card companies who need to cover the cost of stolen customer information and any monetary losses.

A Financial Drain on Business

When a consumer is hit with an incident of identity theft, they immediately call their bank or the lending institution that is showing a billing irregularity. And, typically, that bank will take a day or two to investigate the fraudulent charges and then refund the stolen money to a customer's account. Most customers assume that this is the end of the process, but it's really only the beginning for the bank that just refunded that money.

That's because most identity thieves will never be caught, and banks simply have to "eat" the cost of their fraudulent charges. They are generally obligated -- either by government regulations or their own customer service agreements -- to refund identity theft charges to their customers. But without catching the perpetrator of the crime, they simply write off the amount and adjust their profits accordingly.

According to the Identity Theft Resource center, the FBI estimates that banks, credit card companies, and lending institutions lose an average of $20,000 per identity theft incident. In a culture of mega-banks with millions of customers, that quickly adds up to millions of dollars in annual losses.

The Reputation Effect

Compounding the loss of actual dollars that must be written off after an identity theft incident is the hit a company takes to its reputation. One customer affected by identity theft might excuse the incident or even wonder if it was their fault. The bank is largely spared the brunt of the blame for the incident. But that's not the case when hackers access a bank's records and exploit the identity of millions of people at the same time.

There's no better example of this than Citigroup, which has been hit with repeated invasions of customer privacy that have affected more than ten million people in the last ten years. They're now considered the "company to stay away from" when you need a credit card or a bank account. After all, if they can't keep their private documents private, how can anyone trust their business and lending practices? It might not be fair, but human perception has never really been associated with fairness.

Employees at Risk

Those who work for major banks and lenders also faced increased risk from malicious hackers and identity thieves. That's because they can typically access a large number of the company's private records and customer information files, and it makes them a main target of anyone who wants access to a large number of files all at once. Employees of lending institution expose themselves to personal identity theft as well as the risk that their entire corporate account may become compromised.

Conclusions

Identity theft spans the industry, affecting the largest mega-banks around the world on a grand scale, as well as each of their employees individually, and each of their banking and lending customers. It leads to real losses in the banking industry as well as in private homes, and is a constant threat to the integrity of any business that maintains personal consumer information.

About the author

 

Keith Barrett takes a keen interest in business finance issues. He believes that building a strong online presence, by claiming business directory listings and maximizing online visibility, can help corporations to avoid identity theft.

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