Why financial institutions need your data

If you have ever tried registering with a financial institution, whether it is a bank or an online Forex broker, you will have ended up giving up some of your personal information (or all of it) to the institution in question. You might have even felt a little strange about giving them all of this personal data – why should you? It is a big company that might end up misusing or leaking your personal data, why should you trust them? Well, there are a number of reasons, and all of them are extremely important to both you and the financial institutions. Don’t be surprised by the obsession of financial institutions with trying their best to know as much about you as possible. Even if they do seem like a crazy girlfriend (or boyfriend), they have their reasons to do so and they are entirely valid.

Though, if you feel like financial institutions having your data is an infringement of your rights, there is an alternative to participating in the mainstream economy. The cryptocurrency industry values anonymity, and if it is so to you to keep your private information private, it might be a good idea to consider these guys. A little more on that at the end of the article.

Credit Score and debt

The very first thing you need to understand is the fact that financial institutions are taking a big risk when they agree to work with you. You see, being a middle man of financial transactions means that the company is liable for any kind of losses of funds that might happen during the process. This means that they are liable to be sued or losing a lot of money if they end up working with the wrong person. And no company, especially a bank or a broker, wants to end up losing money. This will only result in their operations being harder to execute. This is why they request your personal information – the more of it they have, the more likely they are to successfully conduct all of the operations relevant to you, without losing money and thus remaining in operation.

The biggest risk that a company takes is when lending money to an individual, in order for this individual to be able to conduct an operation. This is why the credit score system exists – it is a way for all financial institutions to remain aware of how likely you are to pay your bills on time, how likely you are to default and whether you are trustworthy enough to lend money to or not. All banks take a look at your credit score, which is available for viewing to them after they are able to provide the provider of the credit score with the appropriate information. Information such as your date of birth, first name, and last name, your parents’ names, your social security number or your personal identification number your address and so on. This way they will be able to access a detailed summary of your financial operations over the years and protect themselves from any risk you might pose to their operations, the money they lend to you or otherwise.

So what about other financial institutions? Why does a Forex broker require your personal information? Well, the answer is pretty simple. You may know that many Forex brokers offer their clients a chance to trade with leverage. Leverage is pretty much a short term loan that will enable an individual to make a lot of money and pay it back after the intended operations have been conducted. Which is what they need to have your personal information – they need to know whether you are reliable enough to be given the leverage that you are requesting from them. The same goes for all other financial institutions that you might find requesting your information – they need it to make sure that you are reliable enough to repay the debts that you accrue if you accrue it.

Providing funds

Another reason that financial institutions request your personal information is so that they can provide you with the funds that you request from them. Whether it is because you are trying to withdraw funds from your account, or because you requested a check to be sent to your address, financial institutions need to know your personal information to be able to provide you with the requested funds. Yes, as surprising as it may seem, corporations need your address to be able to send you anything, whether it is an email address or a house address.

Another thing that comes with providing funds is the billing process. The financial institutions will be unable to provide the cheques, receipts, and reports on the situation in your account unless you are able to give details of your living situation and name. This is why you should make sure that you provide them with accurate information – if they are unable to confirm that you really are who you are saying you are, living where you say you are living, they will be unable to provide you with the services that they seem to be offering to you.

Protection from identity theft

Something else you need to take into account is the danger that, if you failed to provide the company with relevant details and information on who you are, you might end up giving a chance to impersonators, hackers and identity thieves to take your funds without ever needing to confirm certain details about you. Identity theft is a crime that affects millions of people worldwide, and it is made easier by people who fail to provide details about their person to financial companies who are securing and protecting their funds and personal belongings. Your personal information is used to identify you when a financial institution is dealing with your requests and orders. If you provide them with limited information, they will not be able to ask the questions they need to ask in order to fully confirm that you are the one who is requesting a transfer of money, and not a person who is pretending to be you. In this case, you are giving a window of opportunity to an identity thief who knows just enough about you to make the transaction and take all of the funds you have saved.

This reason is closely related to the one mentioned above. Identity thieves will try to impersonate you, and they will know your name, your last name, they might know your address and even the number of your card. But they will be unable to know all of the information you give to a financial institution, which is what will protect you from the danger of having all of your savings and funds stolen. This is true for banks, as much as it is true for Forex brokers, who will also request that you provide them with the personal information that a bank might ask you to provide.

Information security and legal safety

Some people might have doubts about the security of their personal information, which is why they should always make sure that a financial institution is using appropriate SSL encryption or other appropriate safety measures, in order to secure the personal information of a client. Though, providing personal information to financial institutions also allows the institution to secure your information, as well as funds, better. This is done thanks to the fact that it will be easier to make sure that they can verify your identity when you try to log in from a different device, or if someone other than you try to log in.

Another important aspect of receiving your personal information is the creation of an appropriate legal framework for the relationship of the client and the financial institution. Any kind of financial institution will have to create a legal relationship with their client, even if it is a brief one. Such a legal relationship can only be created and fully enforced only if the full personal data of the user is provided to the financial institution. Otherwise, the contract between the two sides is void, since the information that was provided is not accurate. Contracts like these are important for the appropriate functioning of a financial institution, which, if they are legitimate, should be highly regulated by an authoritative body. Any breach of contractual agreements by either side should and would be punished. If the contract is void because of inaccurate information than there is no way to enforce the law and standards, which means that neither side is protected from the unlawful actions of the other. So, in a way, providing your personal information protects you from the criminality of the organization that you are getting with.

Alternatives: crypto and anonymity

If you still think that giving your personal information to a financial institution is not something you would like to do, then you should consider an alternative financial framework. Cryptocurrencies offer this alternative, with financial transactions and speculation being possible with them as well, while retaining the level of anonymity that you might be striving for. Still, the cryptocurrency industry is in a strange place right now and the volatility that is associated with it might act as something that might discourage the everyday user. Anonymity is good and all, but not at the cost of losing everything you own, so be careful with what you decide to do.

Giorgi Mikhelidze

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