The extensive use of the internet since its early years has exposed zillions of consumer data to online platforms and other online locations. Whether it is personal information such as name, age, gender, and other details shared on social media platforms, or bank account details shared during online shopping, the constant circulation of personal information across the internet raises questions about the privacy and security of such data.
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Businesses and Consumer Data Usage
Consumer data today is widely transforming businesses, and companies are responsible for managing the data they gather and use. Companies rely on these databases to reach customers and carry out sales. The accelerated growth of the e-commerce and technology industries has made us more dependent on the digital world than ever before. From financial details to medical records, the majority of our personal information is stored online. However, consumers today have become more conscious of the privacy and security of their shared data.
Nowadays, data protection has become a crucial part of business success, influencing consumer behavior online. Hence, businesses must find answers to the question: “How can we use data effectively without undermining the consumer’s trust?” The answer to this question will define the future of business and the future of customer experience. Customers today prefer organizations that have high ethical practices and standards. Hence, data privacy has become an integral part of customer experience.
Risks Associated with Consumer Data Usage
As mentioned by the U.S. Government Accountability Office, “The U.S. doesn’t have a comprehensive privacy law governing the collection, use, or sale of personal data.” As technologies are evolving, consumers may remain aware of what data businesses are collecting about them, how the data is used and shared, raising concerns about the privacy of consumer data. Listed below are the risks associated with the use of consumer data.
Social search, or the practice of using social media platforms and Open Source Intelligence tools to gather information,n carries significant liability risks related to consumer data privacy, legal compliance, and security. As data may be public, but one should follow the regulations to ensure secure collection and processing, and elimination of
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Consumer Scores Posing Risks
Companies gather personal and transactional data to create consumer scores, which other entities use to predict consumer behavior for future purposes. However, as the use of these consumer scores is unknown, they pose a range of potential risks. First, the scores could be biased due to the biases or social inequities reflected in the data used. Second, inaccurate data can lead to unreliable scores. Lastly, the extensive use of consumer scores by businesses to maximize their aim can cause unfair treatment of consumers. There is no law that could govern the creation, sale, and use of consumer scores.
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Consumer Concerns over the Privacy and Accuracy of Facial Recognition Technology
Modern businesses use facial recognition technology to identify people and provide accessibility to online accounts, to carry out payments, and perform several other tasks. But consumers may be unaware of potential privacy and data security risks related to this technology, such as a lack of consent, loss of anonymity, and performance differences between demographic groups, leading to misidentification.
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Data Explosion
The volume and velocity of data being collected and used have grown rapidly. Data accessibility is getting cheaper every day, and this means users are dealing with an enormous amount of data. This increases complexity and diversity in data management.
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Customers’ Demand for a Data Dividend
The growing demand for data dividends in exchange for personal data is driven by their increased inclination toward privacy, control, and a transparent digital economy. However, this demand has made it challenging for companies to manage, utilize, and secure customer data. As the rising concern about data privacy is taking over, consumers are opting out of data sharing.
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Regulatory Changes Affecting Consumer Data Collection
The United States privacy law is a complex pathway of national, local, and state privacy regulations. Although the country has no comprehensive national data privacy law, the sector-specific data laws are evolving at the federal level. Thus, the regulatory landscape has become extremely complex, and this complexity makes data collection and usage more risky for businesses.
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Social Media Algorithm Liability
Social media algorithm liability questions are rising rapidly nowadays. Social media companies are experiencing heightened scrutiny and potential legal liability for harms caused by the algorithms of consumer data, including consumer manipulation, data privacy violations, and other.
What Can Businesses Do to Eliminate the Risks?
The primary concern of modern consumers related to data privacy is whether they have any control over how their data is being treated. The majority of the consumers today are worried about data breaches being an inevitable reality. Hence, below are some of the ideas that businesses can adopt to eliminate the risks associated with consumer data usage.
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Adopting Transparency in Data Collection
Companies must adopt a transparent and consensual data collection procedure while gathering consumer data from across various sources. Maintaining that transparency helps in obtaining consumer trust and conformation to share their personal information.
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Establishing a Comprehensive Data Privacy Regulation
A comprehensive data privacy regulation can foster responsible use of consumer data by businesses. A lack in the regulatory landscape has made it challenging to ensure data privacy. Hence, additional federal authority overv internet privacy could ensure that consumer data are collected, stored, and shared responsibly.
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Giving Consumers the Power
Consumers are preferring organizations that prioritizes data security over profits. Thus, while choosing their tech stack, businesses must ensure that data privacy is at the top of that. In terms of designing the business strategy, they must also ensure a proper strategic and transparent procedure of data storage.
