Consumer Surveillance and Financial Fraud
Companies near constantly surveil their customers to collect, analyze, and profit from their private information. A prevailing concern is that the market for private data and security breaches expose consumers to financial fraud. In this study, we exploit Apple's App Tracking Transparency (ATT) policy, which greatly limited the tracking and sharing of personal information on the iOS platform, providing a major shock to the data industry. Using a difference-in-differences design and granular variations in iOS user shares across the US, we find that if 10% more people disallow tracking, the number of financial fraud complaints in the average zip code decreases by approximately 3.21%. We then show that the effects are concentrated in complaints related to lax data security and privacy, identified using keyword searches and machine learning on complaint narratives, and in complaints about firms that engage in intensive consumer surveillance and lack data safeguards. Our evidence quantifies one of the main consumer costs of lax data security standards.
We thank Simona Abis, Hunt Allcott, Tania Babina, Nathan Blascak, Samuel Kruger, Kai Li, Markus Mobius, David Rothschild, Jonathan Wallen, Constantine Yannelis, and Anthony Lee Zhang for valuable comments as well as seminar and conference participants at the Chicago Conference on Empirical Finance, Future of Financial Information Conference, Household Finance Brownbag Series, IMF, Microsoft Research, NBER SI (Household Finance), University College London, UW-Madison Junior Finance Conference, and University of Innsbruck. Niels Wagner provided outstanding research assistance. We also thank Amber Howe from the Federal Trade Commission for providing the financial fraud data in response to our freedom of information act (FOIA) request. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.