Hey Alexa, Should I Be Letting My Members Use You For Their Banking?

July 19, 2022 at 9:56 am Leave a comment

Hello Folks.  Although there are several issues yours truly could blog about this morning, I’ve decided to give you a heads-up about some of the key legal issues to consider as your credit union ponders the extent to which it should allow your members to utilize personal technology assistance such as Google’s Nest, Amazon’s Alexa, and Apple’s Siri.  Incidentally, your members are going to insist on using the technology whether or not your credit union likes the idea or not.

For purposes of this blog, I will be generically referring to Alexa because it is my toy of choice and I love to hear it come to life every other second as I write this blog.  Secondly, voice assistance offer “skills” which are analogous to apps on your smart phone. Just as your credit union may choose to integrate certain apps into your core system, it also has the option of integrating a broad range of banking services into your technology. Everything I’m writing here is assuming that your credit union has not developed its own technology or contracted directly with “financial skill” vendors.

Many credit unions have wrestled with the legal and compliance issues surrounding payment platforms such as PayPal and I expect there to be even greater confusion surrounding Alexa banking services.  In the short term, this means that the most important thing your credit union can do from a legal and compliance standpoint is to understand the risk environment and to minimize those risks in the terms and conditions to which your members must agree as part of using these services. 

Fortunately, NACHA has provided a great resource which I recently got around to reading and which inspired this blog.  In April, NACHA’s Payments Innovation Alliance released  “Voice Payments: Contractual Considerations for Financial Institutions” which is a must read for any compliance officer or counsel delving into this space for the first time.  It highlights the following areas that should be taken into account when developing contract language in this area.  These considerations include:

  1. Incorporating Alexa’s payment skills terms and conditions into your agreement as a way of putting the member on notice that you have no relationship with the third party service that might be providing this skill.  It also puts members on notice that they have certain obligations, such as appropriate settings, over which your credit union has no control.
  2. As much as I love my Alexa, it is also as intrusive as any technology envisioned by George Orwell in 1984.  For example, unless you have changed the settings, just about anything you say is being recorded.  As a result, making sure your member is put on notice of privacy considerations is crucial.  In addition, your privacy policy should be updated to reflect the use of this technology. Sample language provides in part: “Voice payment program technology may record your interactions for quality assurance purposes, and your use of the voice payment program constitutes consent to being recorded.”  In addition, keep in mind that there are states such as Illinois which have incorporated biometric privacy protections into statute.  Expect the number of these laws to continue to grow.
  3. Make members responsible for baseline cyber security protections.  Like any other transaction conducted over the internet, voice banking will only be as secure from hackers as the technology used to facilitate it.  This means that your contract language should stipulate that the member uses it over a secure network. Similarly, your credit union should of course use commercially reasonable efforts to protect this data.
  4. Now we get to the legal issue that yours truly is most intrigued by.  What happens when $3,000 is taken out of your member’s account but your member swears he only asked for $300 to be withdrawn?  In truth, we won’t know the answer to this conundrum until the courts and regulators begin deciding cases.  But in the meantime, this sample language provides you with some language to consider as you draft your own agreements.  “Your smart device and the voice recognition software were designed and manufactured by a third party. The financial institution does not control or update your device or its software. It is possible that a defect or malfunction with the device or software could result in inaccurate transactions and cause potential harm to you. By accepting these Terms, you understand and agree that the financial institution is not responsible for inaccuracies that are the result of the device or software. Please refer to your online account information to confirm that your voice payment command is accurate.”

What is the moral of this story?  We are in the early stages of implementing yet more transformative technology.  This is when contracts are most important.  As you decide whether to use Google, Alexa or Siri, understand your risks and invest in a lawyer familiar with these issues to draft your contracts. 

Entry filed under: Legal Watch, Regulatory, Technology. Tags: , , , , , , , , , .

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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