The financial services industry has been understandably focused on the financial regulatory reform legislation working its way through Congress for the past 18 months. But there is another area where the regulatory hand of government is also being felt and will impact financial services: online advertising.
By next quarter a coalition of trade groups including the American Association of Advertising Agencies, the Association of National Advertisers, the Council of Better Business Bureaus, the Direct Marketing Association, and the Interactive Advertising Bureau are planning to release an online service that will place an icon called the "Power I" on online ads.
When a consumer clicks on the icon, which at press time was still under wraps but supposedly looks like a cross between the letter "I" and a power button, they can view all the data that was used to target them. They can also opt out of being targeted.
At issue is the responsibility of advertisers to inform consumers of the means and information that are being used to target them with online advertising.
"It's about giving consumers transparency and control," says Scott Meyer, CEO of Better Advertising, an advertising information and tracking firm that the consortium tapped for the technology behind the service.
The push by the industry is an effort to head off regulation. In early 2009 a Federal Trade Commission report said that if the advertising industry did not come up with better online advertising rules it would step in and start to regulate. Online advertising companies typically gather information about consumers, such as the Websites they visit or searches they make to build profiles. Marketers say the information is anonymous and can't be traced back to individuals, but privacy advocates are skeptical. Besides the FTC, Congress is threatening to get into the act. A privacy bill is likely to be introduced later this year by Rick Boucher (D-VA).
For banks and other financial institutions the rules for how they can use their mountains of customer data to market, advertise and tailor new product offers to consumers is no small consideration.
The data that banks have about customers is quite valuable, more detailed and more personal than the customer data many other industries possess. But having the data is a double-edged sword. Financial institutions must be hyper vigilant that they are following the law, appeasing regulators and guarding against consumer perception that they are abusing their trusted role by using data in an intrusive manner.
American Express is among four financial services firms reportedly participating in a pilot program. Meyer says the pilot is very limited in scope and most of the participants are keeping their efforts under wraps. The exception is Amex, which did release a statement. "American Express is participating in a cross industry consortium to establish self-regulatory principles and standards for online advertising. Along with other participants, we are currently developing a limited test that incorporates an image onto some of our online ads to inform viewers when they are being shown the ad based on their online activity and will allow them to opt out of receiving such targeted ads from American Express in the future."
Although the process of getting the entire industry on a single platform to deliver this kind of information is complicated, Meyer says the advertising industry has everything to gain and little to lose by making online advertising as transparent as possible. This type of marketing is no way harmful to consumers, he says, and letting them see exactly what's happening and giving them the power to opt out is the smart move. When they see how they're being targeted most consumers will shrug it off, he says. "If you just enable transparency a lot of the problems just go away."
Meyer adds that allowing consumers to opt out of targeting is more than good P.R. It's savvy from a resource allocation perspective. People that do choose to opt out are probably unreceptive to such targeted advertising anyway and companies would do well to avoid the expense of marketing to them. An important distinction to make about the technology, he says, is that consumers can opt out of targeting, not online ads.