Debunking Mobility Myths in Financial Services

May 19th '22

Today more than 98% of adults own a mobile phone and over 90% of them prefer text or mobile messaging to voice calls. So why haven’t financial services companies fully embraced mobile communications for business? In fact, many firms still prohibit text messaging for business entirely.


These concerns have merit – any new communications channel can be subject to compliance, legal or security risks. The regulatory guidance is clear that all electronic communications must be captured, archived, and supervised, which can seem like an overwhelming endeavor. But in the fast-paced, digital business world of today, the benefits of mobile messaging are outweighing the costs.


Let’s take a closer look at some common myths about mobile and the reasons why text messaging and mobile apps are actually a boon to business in the financial services industry.


Recommended Reading: 

Link: Definitive Guide to Electronic Communications Capture: Mobile


  • Myth: Mobile puts a strain on compliance resources

One of the biggest barriers for mobile messaging is the view that it will put a strain on compliance resources. The belief is that the implementation of these technologies to be compliant can be complex and costly. Compliance is often presented with the “hot new messaging tool/new messaging technology” that employees would like to use (or believe they need to conduct business — and often they’re not wrong), but every new tool presents several questions:


  • How will we integrate this with our current operations?
  • Are there privacy or security gaps?
  • Do these fit into our current communications policies or would I need to rework our current practices?
  • Should I engage a vendor that can help me meet my regulatory obligations?
  • How do we reduce false-positive results and make the review process more cost and time effective?


These are all important questions that should be considered with any new tool that a financial services organization may introduce. Firms should fully understand how implementing these tools will impact resources, costs and business effectiveness.


  • Reality: the cost of non-compliance can be significant

On the other hand, the consequences for regulatory violations can be hefty, and public. Take, for instance, these examples:


  • Financial Industry Regulatory Authority (FINRA) fined a brokerage firm $100,000 for willfully violating recordkeeping rules by allowing prohibited text message communications
  • The Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) fined a global bank $200 million for failure to preserve records after the bank admitted that its employees often communicated about securities business matters on their personal devices and for using text messages, WhatsApp and personal email accounts
  • FINRA fined an investment bank $1.5 million for electronic communication failures including failure to retain electronic records in WORM format and failure to retain text message communications from company-issued devices


If you have decided to prohibit text or messaging applications, you should include best practices in your policies and procedures that include flagging prohibited communications. How will you prove your prohibitions are being adhered to? Is this process really more efficient?


With the high likelihood that employees will either disregard or be unaware of prohibitions when it comes to mobile messaging, you should consider the risk exposure to your firm. Although text and mobile messaging have been around for some time, we continue to see firms get hit with fines — sometimes resulting in millions of dollars lost.


With the SEC currently conducting a sweep examination into how financial services firms are keeping track of these types of communications, it may be time to adapt to how communicating has fundamentally changed and update your compliance practices. By allowing for and capturing business communications through messaging apps, you can empower employees while reducing risk exposure to your firm.


SEC prompts sweeping review of more than 100 trader and banker phones in texting probe — via Bloomberg


  • Myth: saying yes to mobile means sacrificing privacy

Some employees may be resistant to using text messaging because of privacy concerns. They worry that their personal information may be subject to capture policies and may be viewed under review. Additionally, many employees use work email for personal communications.


We recommend getting ahead of this by explicitly prohibiting personal communications in your policies and procedures for mobile messaging and any other approved business communications channels. This will reduce the chance that personal messages are captured and help to avoid clogging up the review queue.


  • Reality: the right tools and processes can ensure privacy

Fortunately, there are containerization programs that will separate work communications from personal communications, even for firms with a BYOD (bring your own device) program. You should always address during training what communications the business is required to capture and how they will be used, but it is also important to reinforce how you plan to maintain privacy for personal communications.


The top three industries for which customers say they’re more likely to opt-in for text messages are e-commerce or retail (46%), healthcare (43%), and banking or financial institutions (41%). — via G2


  • Myth: adoption of mobile could to lead to a fragmented client experience

As mentioned above, clients often prefer to communicate using mobile messaging. Some firms may have concerns that employees switching from text to a business email with a client can affect the client’s experience with the firm. But clients are often more responsive to mobile messaging. A Gartner study found that the response rate for text is more than seven times greater than for email.


In today’s digital world where mobile messaging is the preferred communication channel, can you afford to limit these communications? Can you continue to be competitive in an environment where communications are limited? As firms continue to keep up with investor expectations, they should consider how clients prefer to communicate as a key component of their business.


  • Reality: prohibiting mobile could negatively impact client and employee retention

Clients are not the only ones driving the need for text or mobile messaging; employees are demanding this too. Prohibiting preferred communication methods may get in the way of employees’ ability to conduct business. According to a survey by Eagle Hill, 82% of financial services employees said technology improved their ability to provide services for customers. Firms should consider if prohibiting these types of communications will reduce their ability to retain and attract talent.


  • How Smarsh can help

Smarsh offers a solution that can capture mobile content directly from leading carriers and BYOD providers. Once captured, mobile content is automatically sent encrypted to Smarsh where it’s available for fast, on-demand search alongside your other archived communications. These communications are threaded together to contextualize conversations, allowing for a more effective review.


Streamlining your supervision obligations will allow you to reduce time, cost, and complexity, and open up new lines of communication for your staff.


Featured webinar: Regulatory Quarterly Update | Why Cyber & Hybrid Work Can’t Go Unsupervised | Watch On-Demand


Source: Smarsh – Author: Tiffany Magri


About the author:

Tiffany Magri – Regulatory Advisor at Smarsh


As a Regulatory Advisor at Smarsh, Tiffany monitors, evaluates and consults on the financial services regulatory landscape. Tiffany has more than 10 years of experience facilitating compliance with laws and regulations, policies, and risk management. Prior to joining Smarsh, Tiffany was a Senior Associate at Benefit Street Partners and a Compliance Analyst at Broadstone and Manning & Napier Advisors.


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