Retail Virtual Safe Deposit Boxes … Not So Fast

by Tripp Johnson 

The cool evenings and mild daytime temperatures are quickly disappearing in the valley of the sun. Our beloved Phoenix Suns are 0-2 against the Spurs in the NBA playoffs and if you were to walk into any financial institution in the Phoenix area and inquire about a mortgage … the reaction is comparable to screaming fire in a crowded movie theatre. Consequently, if I seem a little cynical this week (well – okay, more cynical than usual), I felt a little justification was in order.

Phew! With that out of the way, let the true ranting begin.

GonzoBankers, I imagine many of you heard the announcement last month that the mighty stagecoach bank, Wells Fargo, will begin offering a virtual safe deposit box service appropriately branded vSafe. Admittedly, when I see a press release from a bank I consider to be one of the pioneers in online banking, I get a little excited.

Initially I thought, “This must be something really unique.” Then a sense of panic rippled down my spine. Did we at Gonzo HQ let a new industry trend slip past our research radar, which employs techniques similar to color spectrum vectoring pattern analysis? Impossible!  

Before I began to reengineer our trend spotter (note: the Gonzo legal team is in the process of trademarking this term) I thought it best if I actually read the entire press release.

What is a Virtual Safe Deposit Box?
Traditional safe deposit boxes are metal containers housed inside a financial institution’s impenetrable steel vault, which normally require two physical keys to open. One key is kept by the customer, the other by the FI. To open the box, both keys are required. People store all sorts of things in safe deposit boxes – family heirlooms, jewels, the secret formula for Coke, insurance policies, wills, valuable pictures (e.g. photos that could be used to blackmail someone), stock certificates, etc. Personally, I do not have a safe deposit box so my reference for what people actually store in them comes primarily from Hollywood movies. (The Da Vinci code had some cool stuff!)

On the other hand, a virtual safe deposit box is just that – virtual.

What this means is that instead of keeping paper documents in a physical container such as a bank vault, a file folder in your desk drawer or a personal safe inside your home or business, a customer would scan all of their personal and or/business documents thus converting them to digital images and then uploading them to a secure server in a remote location (not sure what one would do with family heirlooms, jewelry, etc.). In doing so, the theory is if your house or office burned down or in the event of a natural disaster all of your valuable documents would be recoverable via your virtual safe deposit box. Furthermore, many people store sensitive and/or critical information on their personal computers. A virtual safe deposit box can also serve as a remote back-up record in case your computer crashes or is otherwise destroyed.

Hold your new innovation horses!
As mentioned earlier, the heat is rising in the desert region and bringing with it momentary memory lapses. GonzoBankers, virtual safe deposit boxes are not new. Netbanker.com began talking about virtual safe deposit boxes as far back as 1998.

In May 2000, BankAtlantic partnered with safedepositbox.com providing its business customers with secure virtual storage capabilities. Then in October of the same year, FleetBoston Financial (RIP) launched a system called fileTRUST for small business owners, touting itself as the first major bank in the country to offer such a service. (I guess no one at Fleet monitored press releases from Florida … might explain the RIP). New Century Bank in Chicago launched a service for its customers named FreeDrive in January 2001.

During the past few years many financial institutions began offering virtual safe deposit boxes. Examples include Commerce Bank via its virtualprivatebank (soon to RIP), Zions First National Bank, NetBank (oops, another RIP) and Meadows Credit Union.

Options Galore
Not only have virtual safe deposit boxes been available via banks for several years, there are numerous non-financial companies who offer virtual storage services, and some have offered the service for quite some time.

• www.keepyousafe.com
• www.thesafe.com
• www.virtual-deposit-box.com

In addition to the aforementioned, which clearly mean to evoke a sense of trust and security, companies like Hostingdude, Hostpuppies and even GoDaddy (gotta admit these guys’ commercials are pretty good) also offer virtual storage services. Lest we forget, AOL offers virtual storage via Xdrive, Google has GoogleDocs, and even the folks in Redmond offer SkyDrive.

It seems everyone is getting into the virtual storage business. So, as GonzoBankers, shouldn’t we jump on the bandwagon?

Put the checkbooks down
Friends, I realize we are in the digital age and all financial institutions are diligently pursuing the quest to be paperless. So naturally, we want to encourage our customers to join us in this quest and assist them in converting their most important documents to images.

There are two key reasons why virtual safe deposit is a silly investment right now:

1. Customer adoption won’t occur. While it sounds cool to easily save critical information to a virtual vault at a bank, let’s realistically assess how many customers will do what it takes to make this offering valuable:

• How many PC users actually think to back up files today?
• How many consumers keep nicely organized files of critical documents?
• How many consumers keep organized folders for their local PC files?
• How many consumers are likely to interrupt their ADD lives to slowly scan documents page by page on $89 desktop scanners?
• It simply won’t happen. Why spend the time developing a product that a few percent of customers will use for a minimal fee?

2. Compliance and security headaches will grow.
We bankers understand that this digitized information must be protected – and who better to protect that information than financial institutions? After all, isn’t the word “bank” a synonym for trust? Therefore, providing our customers with the ability to securely store their digitized photographs, personal and business records, wills, insurance policies, receipts, documents that contain personal bank account numbers, credit/debit card numbers and even a list of close friends and relatives is our duty. Seriously, don’t our customers expect this service from us?

Gonzos, with GLBA, SOX, Red Flags, Basel, MFA, the Patriot Act, CIP, etc., don’t we already have enough compliance issues to deal with? Furthermore, our industry’s track record for securing data in just the last 2-3 years ain’t that rosy. (For a quick reminder, see “Do You Know Where Your Data Is?)

Plus, look at the hell we recently experienced with multi-factor authentication. Now just think for a moment – if Internet banking and bill pay could evoke a beast such as MFA, I can’t imagine what FFIEC guidance would be handed down if we all rushed to offer virtual safe deposit boxes to our retail customers.

When Wells Fargo’s press release begins by touting how long the company has been around (in its case, 156 years), my internal BS indicator begins to spike – inevitably the mention of trust and security will soon follow. True to form, Wells quickly informs us that it is their business to “protect customer information.” All I can say to this is – hooey.

Wells says it’s the first financial institution to offer this service to its retail customers. Unfortunately, I could find no information that enables me to dispute that statement. So, it seems FI’s offering virtual safe deposit boxes to retail customers is something new after all. Well whaddayaknow.

Our industry definitely needs to be more innovative, but let’s focus on innovation within banking and leave the document storage business to someone else – at least for now.
-tj

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