Banks Decide That Increasing Chat Security Might Be a Good Thing

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A blog about business and economics.
Aug. 4 2014 11:38 AM

Banks Decide That Increasing Chat Security Might Be a Good Thing

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Ugh! Shouldn't have sent that on IM.

Photo by Stan Honda/AFP/Getty Images

Big banks have finally decided to upgrade their chat services from the Bloomberg terminal standard. Wall Street firms led by Goldman Sachs are looking to buy a stake in Perzo, a free instant messaging service, according to a report in Reuters. Other banks considering the investment include Morgan Stanley, JPMorgan Chase, Bank of America, Deutsche Bank, HSBC, and BlackRock.

Perzo markets itself as, above all, a secure communications platform. It allows for "off the record" and "private" messaging, and encrypts all exchanges end-to-end. (Should you have any doubts about Perzo's emphasis on security, take a look at the giant image of a safe that serves as the background on its website.) Chat has long been a staple at financial institutions, where traders use it to make snap decisions with sales staff and underwriters rely on it to communicate with investors.

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If banks did invest in and adopt Perzo, it would likely become an alternative or replacement to the chat function in the $20,000-a-year Bloomberg terminal that is used by most people in finance. Banks have sought to get clear of Bloomberg messaging before—at Goldman, the project launched in 2013 under the nickname "Babel." But banks have struggled to escape a program that is so entrenched in the industry; the Bloomberg system has an estimated 320,000 users in its directory.

Inertia aside, it's certainly about time that Goldman and its peers looked into overhauling their chat functions. Tensions developed between banks and Bloomberg last spring after it came out that Bloomberg News journalists had essentially reverse-engineered the terminals to spy on high-profile clients for reporting purposes. Indiscreet instant messages have also been key to documenting the LIBOR scandal, earning banks fines from regulators, and revealing some classic Wall Street vulgarity.

Late last year, it seemed that banks had had enough with the trials and tribulations of chat. Barclays, Citigroup, and Royal Bank of Scotland placed bans on certain types of chat rooms and other firms considered taking similar steps. In January, Goldman indicated that it might bar traders from person-to-person messaging over Bloomberg, Yahoo, AOL, and other third-party chat services. It's unclear if buying a stake in Perzo could ever eliminate those kind of risks. But in the eyes of banks, abandoning chat altogether might not be a feasible option.

Alison Griswold is a Slate staff writer covering business and economics.

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