Consumer trust in a data-driven world

Our digital data form the basis for new digital products and services, but the competitor is only a click away if consumer trust is not managed properly.

This blog post was originally published in Dagens Næringsliv (in Norwegian)

Whether we search for recipes, chatting with friends or pay via the web, we create massive amounts of data. Clever use of this information forms the basis for future digital services. With the development of Internet of things and artificial intelligence, the amount of data will increase dramatically, and this data is considered as the raw material in the digital economy.

The value attached to mobile payments are not necessarily transactional revenue, but ownership of customer data. A report by Deutsche Bank confirms this and shows that innovation in mobile payments will open up for new products based on customer data. EU’s payment directive, PSD 2 will further strengthen this trend by requiring banks allow users to access their own data through third-party solutions.

With the Internet of things, the digital and the physical world converge, and privacy is more important than ever. According to Gartner, there will be more than 20 billion connected devices by 2020, all with the ability to collect and analyze data. The emergence of digital ecosystems that exchange data across platforms and industries makes this landscape complex. Last year, The Norwegian Consumer Council examined terms of use, and tested several internet-connected toys and revealed that several of the products failed badly when it comes to ensure security, privacy and consumer protection. Already today it will take over 24 hours to read through all the terms and conditions from the most common apps on an average phone, and one consequence is that many consumers accept the terms blindly if the service is perceived valuable at the moment. However, it is worth having a longer-term perspective on what one’s own data can be used when said data acts as the foundation for machine learning and artificial intelligence.

Facebook is considered one of the leading companies in the development of artificial intelligence, and the background is the vast amount of data Facebook has collected through its services. An important discussion is the ethical issues that will arise with the development of artificial intelligence. For even with the best intentions, a utopian future can quickly turn into a totalitarian dystopia if one does not take account of the unintended consequences of artificial intelligence built on massive amounts of personal data. Microsoft takes this seriously and launched last week a dashboard where the user chooses which personal data should be used for Cortana.

Norway is a country that is already heavily committed digital privacy, and with the new EU privacy rules, GDPR, which takes effect in 2018, attention will gain even more focus. The rules will strengthen individuals’ property rights over their own data, and hold businesses accountable for the use of data so that digital solutions are designed with privacy as a integral principle. Among the requirements is the “right to be forgotten” – where users always have the right to withdraw his or hers consent to use personal data, and data portability – where the user can export and transfer their data to alternative suppliers of choice. If not compliant to this regulation, companies risk to be faced with fines by up to four percent of a company’s global revenues.

EU’s new privacy policy will undoubtedly strengthen individual rights and authority over their own data. With the emergence of the Internet of things and artificial intelligence, the importance of privacy more important than ever. Brand loyalty in a digital world is volatile and theswitching cost is low when the competitor’s services are only a click away.

For companies that want to develop services based on customer data, this means that openness and transparency are essential to earn customer trust.

2 replies on “Consumer trust in a data-driven world”

This is related to payments in the Nordic region, where the payment infrastructure already is delivering payment processing at close to zero marginal cost

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