Net Privacy: Fix the Problems Now
Internet privacy is becoming a serious political issue. Both Presidential candidates have expressed concern about it. The Federal Trade Commission has suggested a code of conduct. And bills pending on Capitol Hill would specifically prevent financial companies from sharing certain personal information without permission from the consumer. Enter "screen scraping," a concept with a most unfelicitous nomenclature that promises to further inflame the debate.
Not that the idea behind it is all bad. For those banking, investing, and managing their finances online, going to a different site for each is a pain. CNBC.com, OnMoney.com, and others offer to aggregate all the functions onto one Web page. Trade in all your log-on names and passwords for just two.
The problem is that all your log-ons and passwords are sent to one of two new companies, VerticalOne Corp. and Yodlee Inc. Every night, their computers go to the sites run by your brokers and bankers, log into your accounts, and scrape up your personal data (ergo, "screen scraping"). Two problems arise. The obvious one is hackers. Anyone with access to the databases of either of these companies can theoretically wipe out the entire financial portfolio of thousands of families. All the information will be in one place. The less obvious problem is liability. Neither VerticalOne nor Yodlee is overseen by government banking or brokerage regulators. And neither has any liability for fraud. So who pays if fraud does occur?
People who do sign up on popular sites will generally have no idea what risks they are running. And that is the heart of the Internet privacy issue writ large. The Net is all about software that makes it extremely easy to gather and move personal information around without anyone noticing. "Cookies" invade peoples' computers and track their surfing. Advertising agencies collate online and offline data lists to identify consumers to potential advertisers.
Privacy is perhaps the one unresolved issue that poses a real threat to the Net economy. Self-regulation is still a possibility, but the lack of a clear set of pro-consumer policies after all these years has undermined the credibility of all those doing business on the Net. A simple technology fix on the browser may still be possible to allow people to select the level of privacy they want. But odds are growing that government policy will be required so people can opt in and control their own financial and health information. The privacy problem must be solved quickly, or the business potential of the Net won't be achieved.