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Consumers Express Discomfort with Offshoring

ORC study of Americans' attitudes toward overseas loan processing should raise alarm for lenders.

A report by Opinion Research Corp. (ORC, Princeton, N.J.) illustrates that although consumers might not fully understand the offshoring concept, they know enough to be nervous about financial institutions sending their personal data overseas to be processed.

In ORC's study "Security of Personal Financial Information in the Financial Product Application Process: A Crisis In Confidence," 47 percent of respondents said they are concerned about the security of their personal information submitted in loan applications, regardless of whether it is processed domestically. Three in 10 said their confidence level in the safety of their information dropped from a year ago. However, 64 percent said their concern increases when they know this information has been sent overseas. Marginal efficiencies in processing speed in offshore locations don't do much to convince consumers' otherwise as well.

"The most important finding is that this is a huge issue that financial institutions offering loans to consumers have to deal with," comments Jeff Resnick, EVP and global managing director at ORC. "I'd ask financial services executives if their employees are ready to deal with this issue and if they're ready to deal with any adverse impact to their reputation."

According to Resnick, consumer attitudes toward data privacy have no doubt been shaped by the extensive media coverage given security breaches over the last several months. Their reactions, he says, are usually more emotional than rational. And this is especially true when offshoring is thrown into the mix. "When you go offshore, there are a lot more unknowns," he relates. "Ignorance breeds concern. When a mega institution goes offshore, it's not like they automatically lower their [data security] standards. But the rigors of these measures are difficult for the public to understand and causes emotional reactions, such as pulling your account from a particular institution."

Consumers demand to be told the location where their financial institution is sending their information for processing (68 percent), according to the study. However, therein lies the greatest dilemma, says Resnick. Although such transparency from their lender engenders a greater degree of trust among customers, banks also run the risk of scaring off consumers by being honest about their outsourcing arrangements.

Such conflicting attitudes leave lenders between a rock and a hard place. Since outsourcing and offshoring activity will only continue to grow, says Resnick, banks need to deal with this problem through education—both internally and externally. "Financial institutions need top-tier education programs for their employees so that when they are asked questions [about outsourcing], they'll have the right answer that will address the customer's concerns and reflect the financial institution in a positive light. I think banks lack that today."

Eventually, consumers will grow more comfortable with the idea of their information being handled on a global basis and the worry will die down, he says. However, "Financial institutions have to make sure their employees know how to answer the questions when asked, otherwise they risk loss of business."

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