“Maintaining Trust in an Electronic World”
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Transcript of “Maintaining Trust in an Electronic World”
“Maintaining Trust in an Electronic World”
Professor Peter P. Swire
George Washington University
Former Chief Counselor for Privacy for the United States Government
San Diego; July 11, 2001
Overview:
Tylenol as an example of gaining trust My background Banking Heritage of Trust:
Security Privacy Authentication
I. The Tylenol Example
History: Tylenol episode in 1982 7 people died from cyanide poisoned capsules Massive publicity worldwide Threatened a flagship product and Johnson &
Johnson itself
The Immediate Response
Tylenol as a textbook case of good crisis management
All pills immediately taken off store shelves Principles:
Long-run considerations drive decisions Take action immediately Provide truthful information
Visible Signs of Trust
Packaging sends strong, credible message that customer can trust the product
Pre-1982: Twist-off cap, then pills Today: Plastic wrap, then child-proof twist-
off cap, then foil seal to demonstrate physical integrity, then pills
Lessons from Tylenol
You must prepare for public relations challenges, especially for new products online: Very fast press cycle today Public perception of risk stokes press stories
What are you doing for financial services on-line to reinforce customer trust?
What compares to the foil seal?
II. My Background
Lawyer for banks and ABHC beginning in 1980s
Taught banking law 6 times in law schools Book on E.U. Data Protection Directive Academic writings on financial cryptography
and electronic payments Current research on computer security Editor of Cyberspace Law Abstracts
Chief Counselor for Privacy
Early 1999 became Clinton Administration Chief Counselor for Privacy (new position)
Gramm-Leach-Bliley & privacy Money laundering & privacy Encryption policy changes 1999 Safe harbor talks Medical privacy (including payments) Other privacy & e-commerce policy
III. Banking Heritage of Trust
Confidentiality and trust as great banking traditions
Trust: Safety and Soundness Financial stability & no runs Physical security -- the bank vault Trust that your money will be there
Heritage of Trust
Trust as Confidentiality: Customer as borrower Customer as depositor Customer who seeks advice from banker Customer who uses a bank’s cash management
services Trust that banker will not disclose my business
Heritage of Trust
Security Privacy Authentication
IV. Security and Trust
Lessons from history Information sharing and computer security
History: The Pay Telephone
The pay phone as a distributed payment system
Vulnerable pot of cash Early attacks by shock, gun, etc. Successive generations of learning by
security professionals Today, a mature & trusted technology
Lessons from the Pay Phone
Challenge today -- can have big outflow of cash over computer networks
“Open networks” like “open road” with phone booth in remote location
We will need successive generations of learning
Will need new encryption, procedures, etc. to become the standard
Security & Information Sharing
My current research: what should be hidden or open in computer security?
In physical world, security done by each institution -- competitors did not have the floor plans to your vault
Today, banks may use same software, hardware, standard procedures
Today, banks subject to same virus or other attack
Security & Information Sharing
When banks have same infrastructure and subject to same attacks, new reason to share security data
ISACs -- Information Sharing & Analysis Centers part of U.S. critical infrastructure protection effort
Moral: will need to trust other security professionals to face common threats, while guarding company proprietary information
V. Privacy
Is confidentiality in banking outdated? Perhaps:
Lower cost for all information flows One-to-one marketing uses data to deliver what the
customer wants, at a profit Mergers for banking, insurance, securities, etc. to
match customers with new products Customer profiling to reduce fraud and money
laundering
Privacy
Is confidentiality in banking outdated? Perhaps not:
Don't you, as an individual, expect your financial information to be treated confidentially?
WSJ poll on privacy in the new century Individuals and businesses cannot have each
purchase revealed to all the world
Are there real privacy problems?
U.S. Bank case, 1999 Information here from public documents U.S. Bank made major commitments to change
600,000 checking account customers name, home phone & address, SSN, DOB,
product code, account number, routing & transit number
U.S. Bank (continued)
330,000 credit card customers name, home address & phone, last purchase
date, date opened, current balance, credit limit, YTD finance charges, last payment date, amount last payment, SSN, DOB, behavior score, bankruptcy score
U.S. Bank (continued)
Notice: “Periodically we may share our cardholder lists with companies that supply products and services that we feel our customers will value.”
Apparently no opt-out Apparently similar activities by other banks
What problems from U.S. Bank?
Data released for unrelated purpose -- a dental plan
“Negative option” by Memberworks: Postcard then have 30 days to cancel If not, then billed annual fee ($59.95) Lots of complaints once fee taken out of
account
New U.S. Privacy Law as a Response Notice -- the bank’s policy Choice -- customers can say no to transfers
to third parties Enforcement -- examiner authority as with
other consumer laws Anti-fraud: fight pretext calling and identity
theft, scrutinize risky data flows
Why customer choice?
Don't “stop all marketing” Do respect choices of individuals who do
not want marketing or other transfers The price of opening an account should not
be undisclosed and unlimited data flows Consumers’ ability to choose creates trust,
and less need for fear
What will happen next for privacy laws? In U.S., may have more privacy laws in
coming years Internet-specific law? Financial services laws -- state or federal?
Safe Harbor and financial services To satisfy regulators, press & public,
financial companies should expect to announce good policies & follow them
VI. Authentication and Trust
In electronic environment, how can you be sure that it is the real customer?
First question -- do you need to know the identity? Cash Smart cards & can be without identity
Levels of Authentication
Where identify, can have levels of authentication, often with loss limits
For ATMs, $300 daily limit and 4-digit PIN Debit cards as a loss limit -- customer can’t
lose more than the account balance For credit cards, customer has $50 loss limit
& banks have anti-fraud programs up to customer credit limit
Authentication
But, how to do big transactions? For consumers, that may take a long time
Walk before run Amazon online before mortgage online Can “Grandma lose her house”?
Authentication
For businesses, build infrastructure Banks as certificate authorities for digital
signatures Rely on institutional controls, much as you do
for large corporate checks Remember the pay telephone:
Successive generations Improve the ways to authenticate and be secure
Conclusions
Tylenol and the foil seal: what are you doing to give visible demonstrations of trustworthiness?
Security– The pay phone & constant improvement– When to share information
Conclusions (continued)
Privacy:– Confidentiality in banking is not outdated– Develop policies and follow them
Authentication– Walk before you run– Use stop losses & other tools to manage risk
To gain trust you must deserve trust:
President Clinton, at Aspen Institute:
“Do you have privacy policies you can be proud of? Do you have privacy policies you would be glad to have reported in the media?”
For security, privacy & authentication:
If you can be proud of your policies, then they will gain trust, and help your organization prosper, in the information age.
That is your job in the coming years
Contact Information
Professor Peter Swire Phone: (301) 213-9587 Email: [email protected] Web: www.osu.edu/units/law/swire.htm Presidential Privacy Archives:
www.privacy2000.org (containing privacy documents from Clinton Administration)