Warnings from the Last Century’s Perspectives on Financial Privacy

Privacy is a value that everyone can seemingly agree on, but like many problems, the devil is in the details.

A Look Back: Financial Privacy in 1999

In my own research on the issue, I ran across an interesting article from the last century (1999), that raises some interesting points.

In “Financial Privacy and the Theory of High-Tech Government Surveillance,” author Peter Swire considers the risks that electronic payments pose to privacy vis-à-vis governments.

Sire says his goals are to develop a vocabulary of the problems that come with government access to financial records, while keeping in mind the concern that comes with private companies also having access to personal information.

The Privacy Paradox

Writing in 1999, Swire could not have foreseen the explosion of social media, smartphones, artificial intelligence, and big data mining; however, even without that context, he delivers one of the most important insights in the privacy debate very quickly.

“The paradox is that people seem to have a long-term concern for privacy while making short-term decisions not to respect it.”

Why It Still Matters Today

In my view, the privacy concern needs to extend to both the private and public sectors, particularly in an era when the personal, financial, and political spheres of our lives are increasingly susceptible to digital influence.

Reading Swire’s article with the present in mind helps raise important questions for today’s decision makers.

Government Access and Global Risks

In considering government access to financial records, Swire notes that U.S. companies may face subpoenas for their private financial records from the government.

“For companies operating elsewhere, there may be even fewer legal protections against government access. As financial databases develop in the private sector, there is a corresponding increase in the power of government to track each purchase made by individuals,” he writes.

This reminded me of a meeting the IPA hosted with the FBI, where the Bureau’s experts warned of how the Chinese government has access to all electronic records stored on servers within China’s borders. It is easy to talk about data just being somewhere in “the cloud,” but the location of those servers matters.

Networked Data and Everyday Privacy

Swire also notes how in “an increasingly networked world, the existence of such databases can easily mean that data will spread from one node to another.”
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Beyond the leaking of data across borders, Swire notes that privacy is not just about illegal things. It can simply be that there are things that you don’t want others to know about – for instance, someone wouldn’t want their employer to know that they are looking at job sites, and businesses don’t want their competitors to know what their employees are researching.

Identity and the Limits of Old Security Measures

In addition, Swire notes that there are bigger problems when personal data can be exposed. “Over time, because mothers’ maiden names and Social Security Numbers are becoming less secure, society will have to develop new methods for establishing identity.” He wrote that in 1999, and here we are over two decades later, still relying on this information in many instances. (Though there is an interesting section where he talks about the Department of Transportation proposing a rule to mandate Social Security numbers on driver’s licenses to make them acceptable for things like boarding a plane. Can you imagine if this had gone into effect?)

From Prediction to Reality

While this paper is a product of its time, the contrast between 1999 and now highlights the need for the financial services industry to devote more thought to what privacy protection should entail in our modern era.

Swire is writing near the beginning of the age of e-commerce, cell phones, and data mining. Many of his concerns – tracking people’s movement through cell phones, identity theft, and data hacks – were either mostly or entirely in the world of imagination.

Looking Ahead: Guardrails for the Future

​Now, though, we can see how his privacy paradox has played out. With bigger, better digital tracking and influencing tools on the horizon, we should work to anticipate how to put up guardrails around our privacy before any more is lost.

Ben Jackson is the Chief Operating Officer of the Innovative Payments Association, a leading trade association representing companies in payments. With over two decades of industry experience, Ben is dedicated to providing valuable information, advocacy, and support to help members improve financial outcomes for consumers, businesses, and government agencies.