NPI vs PII: Data Security in Third-Party Risk Management
Jun 3, 2025
In today’s interconnected digital environment, businesses must navigate an increasingly complex web of data security threats — especially when working with third-party vendors. Two critical concepts often surface in this context: NPI (Nonpublic Personal Information) and PII (Personally Identifiable Information). Understanding the difference between the two and their role in third-party risk management is essential to protecting your organization from breaches, regulatory penalties, and reputational damage.
What Is PII?
PII (Personally Identifiable Information) refers to any information that can identify a specific individual. This includes obvious details like full names, Social Security numbers, driver’s license numbers, and passport information, but also extends to things like email addresses, phone numbers, and even IP addresses depending on the context.
In third-party risk management, companies often share PII with external vendors for necessary business functions — from marketing campaigns to customer support services. However, once shared, the risk of exposure multiplies, and organizations must ensure that every third party handling PII adheres to stringent data protection protocols.
What Is NPI?
NPI (Nonpublic Personal Information) is a subset of information typically referenced in the financial services industry. Under regulations like the Gramm-Leach-Bliley Act (GLBA), NPI refers to information collected about an individual in connection with providing a financial product or service. Examples include account balances, payment history, credit scores, and any personally identifiable financial data not available to the public.
While PII focuses on identifying an individual, NPI zeroes in on personal financial data that must remain confidential. Companies involved with banking, insurance, or any form of financial advising must be particularly cautious when transferring NPI to third parties, as mishandling can trigger severe compliance violations and customer trust erosion.
Why the Difference Matters in Third-Party Risk Management
The distinction between NPI and PII might seem subtle, but it has major implications for third-party risk management strategies. Here’s why:
Regulatory Requirements: Different laws govern how NPI and PII are protected. Financial institutions must comply with the GLBA, while PII is more broadly regulated under frameworks like the GDPR, CCPA, and state-level data protection acts. Knowing whether your third party is handling NPI, PII, or both determines which regulatory standards apply.
Vendor Due Diligence: When onboarding a third-party vendor, companies must conduct thorough due diligence to assess how the vendor secures PII and NPI. This means reviewing security certifications, encryption standards, incident response protocols, and ongoing monitoring systems.
Contractual Safeguards: Data security obligations should be clearly outlined in vendor contracts. Companies must specify how NPI and PII will be collected, stored, transmitted, and destroyed, ensuring that vendors are contractually bound to meet your organization’s data security standards.
Incident Response Planning: If a third party suffers a data breach involving NPI or PII, your organization could be held accountable. Thus, having a robust incident response and notification plan that includes third-party breaches is essential.
How SkyBlackBox Enhances NPI and PII Protection
At SkyBlackBox, we understand that third-party risk management is no longer just a best practice—it’s a necessity. Our platform offers advanced tools for:
Continuous vendor monitoring to detect potential vulnerabilities that could expose NPI or PII.
Automated risk assessments to ensure that third parties align with your organization's data security policies.
Smart contract management features that help track compliance obligations specific to NPI and PII protections.
Real-time alerts in case of any security incidents or compliance risks involving your third-party vendors.
By partnering with SkyBlackBox, you gain better visibility and control over how sensitive data is handled across your vendor ecosystem, reducing exposure to breaches and regulatory fines.
Final Thoughts
As third-party relationships become more complex, the stakes for data security rise sharply. Differentiating between NPI and PII is crucial for building a resilient third-party risk management strategy. By proactively identifying the types of data being shared and ensuring every vendor upholds rigorous data protection standards, businesses can shield themselves from costly vulnerabilities.
SkyBlackBox empowers organizations to simplify and strengthen their approach to third-party risk management — ensuring that both NPI and PII are protected with the diligence they deserve.