In reality, keeping personal data safe in today's online world is impossible. Every username and password, email address, credit-card number, and Social Security number is vulnerable because financial institutions, health-care providers, manufacturers, retailers, and government agencies store information either in the cloud or on servers. Over half of households report that protecting against loss of savings and investments is an extremely important financial need; two-thirds assert that protection against financial crimes is an extremely important financial need. As more hacker events compromise sensitive, private information, the proportion of very concerned households is likely to increase.

Identity theft is a priority for companies as well as for many consumers and investors. In August 2014, Target announced that the past Christmas-selling season's data breach of 12 million customers' personal data and credit-card information cost the company an estimated $148 million. Target offered compromised customers a year's worth of credit screening at no cost—an amount that has affected company earnings. Also in August, the New York Times reported a Russian-hacker ring stole 1.2 billion "user name and password combinations [worldwide] and more than 500 million email addresses," and Community Health Systems (Franklin, Tennessee) experienced a Chinese hacker attack that stole the "names, Social Security numbers, and addresses" of 4.5 million patients. In early September, Home Depot suffered a data loss even bigger than Target's.

Demographics

Household heads for whom identity theft is a high priority tend to be mature; two-thirds are age 50 and older. These households' pretax incomes are modest—not necessarily because the household head earns low wages but because somewhat more than one-half are retired; slightly more than 40% are single. Widows and retirees are more likely than married households to consider ID theft a priority. High-priority ID-theft households are similar to all households. However, the target for protection products and services is clearly households living on fixed incomes. Household heads most concerned about identity theft:

• Have a median age of 55, in comparison with age 51 for all households
• Have a median annual income of $42K, in comparison with $45K for all households
• Are no more or less likely than all households to have children, Boomerang Kids, or dependent adults.
• Are just as likely as all households to live in a single-family home (60%) and to own their home (70%)
• File—almost two in five of them—individual tax returns
• Are above average for being a veteran of the US military (23%, in comparison with 19% of all households)
• Are less likely than all household heads to be an owner or part owner of a professional practice or business.

Financials

For many households, the cost of identity theft is a very real threat. Not only do they lose assets, but also they have little chance to recoup those losses through earned income or further savings and investments. Households extremely concerned about ID theft:

• Have an average net worth of $427K, in comparison with $365K for all households
• Have a mean balance of $185K in retirement products
• Have a mean balance (including 0) of $463K in investment accounts
• Are more likely than all households to own CDs, money-market deposit accounts, corporate bonds, and cash value of life insurance
• Are more likely than all households to have individual long-term-care insurance, although the proportion is small (7%)
• Are just as likely as all households to use most types of financial institutions, except are more likely to use a financial-planning company
• Are more likely than all households to use 12 to 15 different financial institutions—which higher-than-average use exposes them to a greater risk of theft.

Financial Attitudes and Interesting Tidbits

Many households for which identity theft is a priority have saved and invested wisely. They are financially responsible, organized, somewhat frugal, and quite risk averse; they look for ways to manage assets to make them last. Unknown and uncontrollable events such as ID theft are particularly disruptive and threatening. Of these households:

• Somewhat more than half use the internet to connect to a financial institution for financial transactions in a typical month, yet only 12% feel comfortable doing financial business over the internet.
• More of them than of all households are likely to consider both a guaranteed interest rate and insurance on savings very important.
• More than the average number worry about the safety of deposits in banks or savings institutions.
• More than two in five are very concerned about having adequate income during retirement.

Implications

In the past five years, growth in identity-theft-protection services has been slow. As more financial activities move online and more people access the internet by smartphones and tablets, the number of financial accounts, services, and online financial transactions will continue to increase. At the same time, security breaches will become more frequent and demand for protection should increase. However, government regulations in response to consumer complaints about contract terms and misleading advertising by these firms could constrain industry-operators' revenue. The bottom line is that the majority of households most concerned about identity theft believe that providers should be responsible for keeping their personal information safe. Institutions have a opportunity to differentiate themselves from competitors by addressing the issue of ID theft head on; consider developing and promoting an ID-theft policy in the same manner that you introduced your institution's privacy policy several years ago.

Learn more: Contact us to request an on-site presentation of these findings along with a Q&A session. Presentations are available to MacroMonitor subscribers for a small additional fee.