Financial Institutions Are Running A Reputation Risk – Strategy With RS
Did you know that some financial institutions, who issue Credit & Debit card, despite knowing that data has been compromised, do not take action to replace the Card issued by them. They merely put it on a watch list. And when a fraud is brought to there notice they take immediate action to replace it.
(Photo Courtesy : Clipartpanda.com)
How do they come to know that their customer’s data has been compromised? Every financial institution have cyber security agency who trawl the net to keep a watch on the online ‘black market’ place where these stolen data are put up for sale. It is here that the actual fraudster buys the data to make illegal transaction.
The cyber security experts flag of the details of Credit / Debit card data that is stolen. The financial institutions now put it on a watch list but do not take any concrete action to replace it, till the card- holder reports an illegal transaction. And then they take swift action to block it & replace it.
Why do they wait for the illegal transaction to happen before they take action?
Simple economics. It takes $5 to replace a card. If a few millions card data has been stolen, then you can calculate the cost a financial institutions will have to incur to secure there customers data who have placed trust in them.
So why don’t the banks act proactively to secure their customers data?
The logic used by card issuing authorities is that stolen data does not automatically lead to misuse. But as soon as any misuse is reported the bank takes immediate action to replace it.
If you wish to read more about it please click here
What should the response of a financial institutions be when disputes a bank’s best effort its customers data gets stolen & starts being misused – it has been hit by a Reputation management issue?
If you wish to gain an understanding about strategies for handling a Reputation Management issue I would invite you to read my article published earlier, titled, ‘Reputation Management: What To Do When Your Brand Is Hit By A Scandal’. The article also has a video embedded in it which will summarise the key points.
In this series, Rajesh Srivastava, Business Strategist and Visiting Faculty at IIM Indore gives you a regular dose of strategy case studies to help you think and keep you one step ahead as a professional as compared to your peers. Rajesh is an alumnus of IIM Bangalore and IIT Kanpur and has over 2 decades of experience in the FMCG industry. All previous Strategy with RS posts can be found here