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Tracking Cookies: Should Banks and Credit Unions Use Them?

By Rohit Srivastava, VP, Business Technology, WSECU

Rohit Srivastava, VP, Business Technology, WSECU

I was shopping for hotels in Dallas on Travelocity. com, browsing my options at a perfectly nice Hilton Garden, but I ended up not booking the room. Ten minutes later I started looking up stock prices on finance.google.com and saw an advertisement for rooms available in Dallas at Hilton Garden from Expedia. com for $121.65. Later that evening I logged onto Facebook on my mobile app and it told me about Hilton Garden at Dallas Priceline.com for $115.25. Oh, and at the same time, Facebook also told me that four of my friends like Priceline. Wink, wink!

"From marketing prospective these cookies are awesome and can help members get best deals, but from a privacy point of view it is not"

How did three different unrelated websites and a mobile app know that I need a room in Dallas? By using “tracking cookies.” Cookies have been around since the birth of internet browsing. Marketers have been using cookies in various different ways to learn about their customers. One such type of cookies is “tracking cookies”. It helps the marketers to understand the customer’s browsing behavior even before they decide to buy. Tracking cookies have been there for a while but financial institutions have been shy on using them. Should they incorporate tracking cookies?

First, how do “tracking cookies” work? Typically, websites put cookies on your computer (or mobile phone) mostly to remember you. But a lot of websites now partner with advertisers and let them put cookies called “tracking cookies” or “third party cookies”. These cookies have more detailed browsing information than just remembering you. Advertisers can track your browsing activities using these cookies and build a database of your online behavior, thus leading to almost instant, intelligent or sneaky offers.

From marketing prospective these cookies are awesome and can help members get best deals, but from a privacy point of view it is not - let's face it - a little creepy. Here are a few considerations for financial institutions to think about when considering tracking cookies.

1. The Financial Institutions rely on relationships, their brand and referrals but all of these have an aspect of being at the right time and at the right place. You want to target the members when they are searching for the product, NOT after the fact. Tracking cookies gives an opportunity to understand users’ needs while they are shopping and reaching out to them in a timely manner.

2. If there is one place customers and members expect their data to be safe and remain unshared, it's with their financial institution. Trust is an important brand value for financial institutions. If they start using the tracking cookies their brand could be perceived as untrustworthy or even sneaky. Can financial institutions protect against the brand implications of tracking cookies?

3. What about competition? If banks and credit unions do not implement the tracking cookies, there are other financial institutions that will and already do. By not implementing this marketing tool, are they giving away business to other financial institutions?

It’s a tough question for financial institutions. And it can be complicated because, they are highly regulated, typically conservative and generally perceived as trustworthy.

When Facebook started using tracking cookies and targeting advertisements, a lot of users did not like it. But now many have embraced it because it helped them to shop appropriately. Facebook also empowered their users to protect their own privacy by providing appropriate privacy settings and tools, thus finding a balance between privacy and targeting customers. Facebook had the best quarter earnings in two years. Similarly, financial institutions need to find a balance. Brand is “King” and targeting products within customers’ privacy preferences would take them a long way and help them explore untapped opportunities.

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