In today's highly networked, information-dependent age, corporations know a lot about you -- and are working to learn more every day. Only 21 percent of Americans say they have "a lot of trust" that corporations will keep their private, confidential data safe. And when it comes to protecting customers' personal data, Americans trust banks the most.
That's the conclusion of a Gallup poll of 1,011 adults across the country. When asked what kinds of companies they trust "a lot" to keep their personal data safe:
39 percent trust banks and credit card companies.
26 percent trust health insurance companies.
19 percent trust cellphone carriers.
16 percent trust email providers.
14 percent trust retail stores.
14 and 12 percent trust state and federal government agencies, respectively.
6 percent trust online retailers.
And just 2 percent trust social networking sites.
The reason for the low level of trust placed in online retailers and social networking sites seems obvious, given the recent data breach at eBay (EBAY) and Facebook's (FB) "emotional manipulation" of postings fed into users' news feeds (although that brouhaha erupted after the April survey). Likewise, mediocre levels of trust in retailers are expected after the big data hacking scandal at Target (TGT) late last year.
%VIRTUAL-article-sponsoredlinks%Distrust of governments, email providers and cellphone providers can probably be explained in three letters: NSA.
And health insurers -- possessed of potentially some of the most sensitive private, personal information, such as records on cancer and pregnancy -- are going to be viewed with suspicion. Sure, HIPAA imposes stringent rules aimed to make insurers keep health information secure. But how certain are you of how much privacy you're signing away when rushing to fill out those forms in the doctor's waiting room? Uncertainty leads to distrust, and that's probably one big reason that consumers aren't fully confident in their health insurers.
"Trust Me, I'm a Banker"
But this still leaves us with why consumers view banks, above all others, as worthy of their trust.
Think back to when these privacy breaches began making regular appearances in newspaper headlines 10 years ago. Banks were charter members of the Personal Data Butterfingers Gang. One of the first high-profile data breaches was Bank of America (BAC), which in December 2004 fessed up to misplacing data tapes containing about 1.2 million customer records. In quick succession, Citigroup (C) made a similar admission (3.9 million accounts lost); then Ameritrade (AMTD) lost 600,000 customer records ... and ABN AMRO, Wachovia, People's Bank and on, and on and on.
While the drumbeat of high-profile data thefts at banks has lessened, it's still surprising that folks are so quick to forget, forgive and trust bankers with their data, above other companies that have proven no less vulnerable to personal data losses. So why do people trust the banks? In a nutshell: Money.
Federal Law Limits Your Losses
When a bank gets robbed, your bank account doesn't get affected. The bank and its insurers take the hit. Similarly, federal law caps liability for debit card fraud at $50 when reported within two days of a loss -- and at $500 if reported after that. Credit card liability is capped at $50. And in many cases, banks free their customers of all liability. True, they pay for this generosity by jacking up the rates on loans, credit card interest and other fees. But the end result is that customers know what they're getting into and so feel more comfortable taking on the risks.
Banks also tend to be the companies most often advertising fraud and credit monitoring services. Whether customers choose to pay for such services or not, the idea that the bank is offering them tells consumers, "They're on it. They know what's going on, and they're paying attention to data security."
For the banks, of course, that just makes sense. Keeping a close lookout for fraudulent activity helps to limit their losses on the $500 and $50 increments mentioned above. It doesn't hurt a bit, though, that it also turns out to be smart marketing.
Motley Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Bank of America, eBay, Facebook and TD Ameritrade. The Motley Fool owns shares of Citigroup.