6/25/2012 7:42 PM ET|
5 companies that know your finances
You know where you swipe your credit card, but do you know where your financial data goes after that? Or who has access to those all-important numbers?
In late March, a payments processor called Global Payments experienced an enormous security breach, and 1.5 million credit and debit cards from Visa and MasterCard were compromised in the process. As a consumer, you might find this at least a little bewildering. Your bank's name is on the card. Visa or MasterCard's logo is on it. Who, exactly, is Global Payments, and why did they get to build the sloppy security protocols that led to your data being compromised?
It's not a bad question. You enter into a cardholder's agreement with Visa or MasterCard, mediated by your bank. The company processing your payments is determined by where you choose to swipe your card. Merchants sign up with payments processors -- you don't.
So your financial information's security is in the hands of corporations that you don't know the first thing about. Global Payments accounts for a small minority of the payments-processing space, but it compromised more than a million accounts. Doesn't it make you wonder what other companies you've never heard of routinely handle your sensitive financial information?
What do you even know about these companies? Do you want them to handle your info? And do you have any choice? The short answer to the second question is no -- short of hopping off the grid entirely. And you don't want that. What would come of that Klout score you've been working so hard to improve?
1. First Data
Because payments processors are so top-of-mind lately, it would only be right that we start with First Data, perhaps the biggest payments processor you've (maybe) never heard of. This Atlanta-based, 24,000-employee behemoth processes an estimated 60 billion transactions a year, totaling $1.4 trillion in volume. It operates in 34 countries.
Perhaps you've noticed the Star Network logo at your supermarket's checkout aisle and didn't know what it meant. That's First Data's debit payments processing network. This is First Data's only real hint to the public that it exists. Indeed, it isn't even publicly traded despite being so large. KKR, the private equity giant, bought the payments processor in a leveraged buyout in 2007.
Were First Data to experience a security breach on par with what Global Payments did, it would likely be even more damaging to the credit and debit card industry as a whole. Do what you want to keep yourself safe -- don't use your card online, never use it at Bulgarian restaurants, whatever -- but swiping your card at any business puts your information into its system. And those systems can be compromised, as we see again and again.
Just what FiServ does to make money isn't immediately apparent, but whatever it does, it does it well: It has 20,000 employees and 16,000 clients. The Wisconsin-based company has been in business since 1984, and brought in $4.3 billion in revenue in 2011. FiServ says it "helps (its) clients solve complex business challenges."
What that translates to is payments processing, like First Data, and core banking -- helping banks manage account transactions across multiple platforms. FiServ moved $1 trillion around last year alone -- that's roughly 1/15th of the U.S. gross domestic product. It processed more than 4 billion mobile deposits last year. It's huge and it's everywhere: Last year, it won an award for its core banking solutions in China, from The Asian Banker.
It's the biggest FinTech company out there, and you probably interact with it hundreds of times a year. You just don't know it, and FiServ doesn't stand to gain anything from you knowing more about what it does. What does FiServ do? FiServ provides solutions. What sort of solutions? Business solutions -- don't worry about it.
This question-begging logic extends even to its address, which has a (presumably intentional) internal rhyme scheme -- 225 Fiserv Drive.
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All of these types of businesses were hastily created early on and then hired lobbyists to get them into the money stream. No one can deny that the globe was ill-prepared for electronic manipulation of our transactions to fully wipe-out other methods. One thing is absolutely clear, we moved too quickly and electronic reliance is not stable, safe or secure. Unfortunately, banks masterminded the Gramm Leach Bliley Act in 1999 to gain omnipotence over any alternatives. We are here and they trashed the old mechanisms. I still say we need to close the banks, reconcile and not re-open until there are proper safeguards. These electronic systems can also serve as bridging mechanisms. We can carefully use them to maintain a basic economy while reconstructing our financial sector minus banksters and the racket that banks are. Beg to differ? If you review the sheer enormity of the Euro Crisis and realize that the USA is actually in a worse position, you gather two courses... one, we fix it and Elitists come back to Earth minus most of their hoarded fiat wealth, which gets redistributed to balance the whole nation fairly... or you keep pumping this scam until it comes apart completely. A war generally follows that path if you know your history.
The VERY FIRST question poised when the Automated Clearing House (ACH) was proposed and to be implements was-- who covers the cost of every transaction and who gets that fee income? No reply. It went into motion anyway. Guess what the answer was? Banks. It's a racket.
Companies do spend a lot of time and money gathering information about us and store it in data warehouses. That said, they also hire kids to work for them that know data processes very well but nothing about the data or what indications arise from it. Thus, we get more advertising, but most of us are insensitive if not offensed by it, so... collecting data is only useful once our accounts are breached and manipulated. Manipulated accounts are generally fraud-protected, so... the collector of data pays for the breach caused by the collection of data that serves no useful purpose. If that's not throwing good money out the window, I don't know what is!
Eliminate data warehousing and we likely eliminate most of the crime associated with data collection. Right?
"I always pay in cash"
So you think. Your cash is simply a point of entry for the electronic system. You don't walk into the utility company and pay your bill, it is handled by third-party transactions. Little do you realize that the fine print of transactions (legalese) releases any other party but YOU from liability once you hand over that cash. In short, if the transfer fails, your bill isn't paid and you owe it again. Also, all of your online financial data is not subject to any protection. If your bank or broker posts your info and a hacker gets to it... no liability beyond YOU.
Tennessee: Michigan's unemployment compensation is also handled by Chase. They wouldn't do it if there wasn't fee income in it.
The processors just process credit cards and have no real information on you personally, but having your card number is a big deal. The banks that sponsor your credit card do as well as some of the merchants. Your credit cards basically only have the card number, expiration date, your name, the zip code of your billing address and the CVV code. Some merchants will store the information and use it to target you for a number of things such as advertisement, (they use your zip code and name to find you). Some Merchants also use the information to provide you with Rewards for being a frequent customer or spend so much in their store.
It is the Banks and the credit bureaus that have the largest amount of information slightly ahead of the insurance companies, you know the guys that you have your health insurance with.
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use it in secret algorithms to stack the odds against consumers for affordable financial products. If top companies like Facebook can't get algorithms right and they have the top developers money can buy, guess what? The financial industries have been telling a big fat lie all these years about the effectiveness of their secret algorithms, that is why they are all secret.
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fine print of transactions (legalese) releases any other party but YOU from liability once you hand over that cash. In short, if the transfer fails, your bill isn't paid and you owe it again. Also, all of your online financial data is not subject to any protection. If your bank or broker posts your info and a
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