Not so long ago, data privacy was a relatively small part of business operations at some companies. They paid attention to it to a minor degree, but it was not a focal point or prime area of concern. That’s all changing now as businesses now recognize that failing to take privacy seriously harms the bottom line. That revelation changes how they operate and engage with customers.
One of the reasons for this change is the General Data Protection Regulation (GDPR) rule which now affects all European Union companies and those that do business with EU residents. Some analysts viewed regulators as slow to begin enforcing GDPR with fines, but some of them imposed in 2019 total more than $100 million. In 2018, Twitter and Nielsen cited the GDPR as a reason for their falling share prices.
No Single Way to Demonstrate Data Privacy Awareness
One essential thing for companies to keep in mind is that there is not an all-encompassing way to show customers they emphasize data security. Although security and privacy are distinct, they are closely related to and impact each other. That’s because what privacy awareness means differs depending on how a business operates.
For example, a business might collect data from customers and feed it back to them through an analytics platform. In this case, showing data privacy awareness might mean publishing a policy that mentions how the company will never sell a person’s information to others.
For an e-commerce company, emphasizing on a commitment to keep customer information secure might mean going into details about how it protects sensitive data such as credit card numbers. It might also talk about internal strategies used to keep customer information as safe as possible from cybercriminals.
One universal aspect of data privacy awareness is that it makes good business sense. The public is now much more aware of data privacy issues than in past years, and that’s largely due to the high-profile breaches that capture the headlines.
Lost customers, gigantic fines and damaged reputations after Data breaches and misuse
When companies don’t invest in data privacy measures, they could be victimized by severe data breaches. If that happens, ramifications are often substantial.
A 2019 study from PCI Pal surveyed customers in the United States and the United Kingdom to determine how their perceptions and spending habits changed following data breaches. It found that 41% of United Kingdom customers and 21% of people in the U.S. stop spending money at business forever if it suffers a data breach.
The more common action is for consumers to stop spending money at breached businesses for several months afterward, the poll revealed. In total, 62% of Americans and 44% of Brits said they’d take that approach.
However, that’s not the only potential hit to a company’s profitability. As the Facebook example mentioned earlier indicates, there can also be massive fines.
Two other recent examples involve the British Airways and Marriott Hotels breaches. A data regulatory body in the United Kingdom imposed the largest-ever data breach fine on British Airways after a 2018 hack, with the penalty totaling £183 million — more than $228 million. Then, that same authority gave Marriott Hotels the equivalent of a $125 million fine for its incident, alleging inadequate cybersecurity and data privacy due diligence.
These enormous fines don’t only happen in the United Kingdom. Besides its recent decision with Facebook, the U.S. Federal Trade Commission (FTC) reached a settlement with Equifax that required the company to pay $700 million after its now-infamous data breach. It’s easy to see why losing customers after such issues could make such substantial fines even more painful for the companies that have to pay them. The FTC also investigated Facebook’s Cambridge Analytica scandal and handed the company a $5 billion fine for failing to adequately protect customer data — the largest imposed by the FTC.
Problems also occur if companies misuse data. Take the example of a class-action lawsuit filed against AT&T. The telecom giant and a couple of data aggregation enterprises allegedly permitted third-party companies to access individuals’ real-time locations via mobile phone data. Those companies didn’t check first to see if the customers allowed such access. Such news could bring about irreparable reputational damage and make people hesitate to do business.
Expecting customers to read privacy policies is not sufficient
Companies rely on both back-end and customer-facing strategies to meet their data security goals and earn customer trust.
Some businesses go beyond the norm by taking the time to publish sections on their websites that detail how their infrastructure supports data privacy. They discuss the implementation of things like multi-layered data access authorization framework, physical access controls for server rooms and data encryption at rest and in transit.
More research on the subject by Varonis found that it can take nearly half an hour to read some privacy policies. That reading level got more advanced after the GDPR came into effect.
Together, these studies illustrate that companies need to go beyond anticipating that customers will read what privacy policies say. Moreover, they should work hard to make them shorter and easier for people to understand.
Most people want companies to take a stand for Data Privacy
A study of 1,000 people conducted in the United Kingdom supported the earlier finding from Gemalto where people thought the companies holding their data were responsible for maintaining its security. It concluded that customers felt it was “highly important” for businesses to take a stand for information security and privacy, and that 53% expected firms to do so.
Moreover, the results of a CIGI-Ipsos worldwide survey said that 53% of those polled were more concerned about online privacy now compared to a year ago. Additionally, 49% said their rising distrust of the internet made them provide less information online.
Companies must show they care about data privacy and work that aspect into their business strategies. Otherwise, they could find that customers leave them in favor of more privacy-centric organizations.
To get an idea of what can happen when companies have data privacy blunders, people only need to look at how Facebook users responded in the Cambridge Analytica aftermath. Statistics published by the Pew Research Center showed that 54% of adults changed their privacy settings in the past year, while approximately a quarter stopped using the site.
After the news broke about Facebook and Cambridge Analytica, many media outlets reminded people that they could download all the data Facebook had about them. The Pew Research Center found that although only 9% of its respondents took that step, 47% of the people in that group removed the app from their phones.
Data Privacy is a Top-of-Mind concern
The studies and examples mentioned here strongly suggest consumers are no longer willing to accept the possible wrongful treatment of their data. They increasingly hold companies accountable and don’t show forgiveness if they don’t meet their privacy expectations.
The most forward-thinking companies see this change and respond accordingly. Those that choose inaction instead are at risk of losing out. Individuals understand that companies value their data, but they aren’t willing to part with it freely unless companies convey trustworthiness first.
Kayla Matthews writes about big data, cybersecurity, and technology. You can find her work on The Week, Information Age, KDnuggets and CloudTweaks, or over at ProductivityBytes.com.