With the onset of data collection and online tracking practices, every modern company is now an internet company. This can largely be attributed to the growth of e-commerce.
Why Consumer Data Is so Valuable
Consumer data, such as home address, age and gender, purchase and browsing history and even clicks and time spent online is crucial intelligence that informs product design, marketing decisions, user experience and other key retailer strategies. Consumer data allows retailers to design highly detailed consumer profiles that can be used to influence behavior and attract and target new customers.
When consumers began shopping for everything online, companies began to gather and accumulate consumer demographic and preference data. Companies can collect, store, and buy and sell personal information shared with them by a consumer. They can also gather information about consumers’ preferences and habits online through cookie tracking and other marketing tools.
While, in theory, this lends to greater personalization and better customer experiences, it also opens the door to discrimination and risks to consumer data privacy. How can businesses address these issues and better protect customers? Let’s dive in.
How the Data Marketplace Fuels Discrimination
On the websites of services ranging from freelancing to ride sharing to dog walking, many sellers now have discretion over whom they do business with, solely on the basis of looks or a name. The availability of such information is platform specific, with some sites preserving a fair amount of anonymity and others harking back to practices long banned in offline markets. Although having details about prospective transaction partners may make people more comfortable, it facilitates discrimination.
Data brokers are another key stakeholder in the buying and selling of consumer data. These companies specialize in aggregating, analyzing and reselling consumer data for marketing purposes. Information gathered from social media, e-commerce sites and apps is sold to marketers, who use it to tailor their advertising efforts and target the demographic based on their interests and information collected.
Again, this is a practice that should facilitate a better overall user experience. But the reality is that marketers can leverage this data to include or exclude certain groups based on age, race, ethnicity — you name it.
The Privacy Breakdown
Companies are responsible for consumer data and must take proper precautions to collect and store it. The lack of transparency when selling consumer data becomes a question of business ethics if consumers are not aware nor feel like they can control where their data goes.
For example, applications on personal mobile devices like tablets and cell phones are a huge source of consumer data collection. Social media platforms, in particular, are notorious for collecting information on users based on what they comment, post and like, further feeding their preferences into an algorithm used to target posts and advertisements.
Other applications on mobile devices, like maps, can also gather and store data about user location. Even when they aren’t open, many mobile apps are running in the background, collecting data like time spent online, browsing history, location, call logs and texts, camera roll pictures, email and phone access and more. As technology evolves — as with today’s artificial intelligence capabilities — these capabilities become even more sophisticated and even more intrusive.
Why Data Collection Sparks Concerns
Data brokers have faced criticism within the past few years as lawmakers and consumers alike have raised concerns related to privacy and national security.
Another major concern relating to the collection and commercial use of consumer data online is that these practices can result in discrimination and bias. In the past several years, many have raised concerns about the ways companies use machine learning alongside consumer data to make decisions that have real impact on people’s lives. For example, research has shown that AI can perpetuate racial bias in underwriting for financial products such as insurance and loans.
The Battle for Privacy Regulation
Seven in 10 Americans say they will not do business with a company if they suspect their data will not be protected, according to recent Cassie research. With this in mind, it’s even more important for companies to build trust with consumers than it is for them to collect treasure troves of their personal data to try to influence their behavior. Consistent communication with customers about their stance on data privacy practices reinforces transparency between customers and keeps organizations accountable.
Consistent communication with customers about their stance on data privacy practices reinforces transparency between customers and keeps organizations accountable.
Further, 87 percent of U.S. consumers believe that government bodies should do more to regulate consumer privacy online, and 95 percent agree that individual brands and companies should be more responsible in their data privacy practices, according to Brookings Institute research. But most would agree that lawmakers and technology companies alike have been slow to address privacy concerns.
But regulation can only do so much when organizations already have the infrastructure and past information about consumers within their grasp. As soon as data privacy laws are passed, organizations can evolve more quickly than legislation and find ways to track consumers. The only way to move forward is to give consumers more control over their data.
How Companies Can Protect Customers
Companies can and should educate consumers about what information is collected and how it is used and give them the option to opt in and out of sharing preference information. Beyond banners and pop-ups, which can often cause consent fatigue, organizations can also advocate for better regulation within their respective industries. Organizations have to stand up for consumer privacy and pull their weight when it comes to managing data collection.
The future demands both ethical frameworks and laws that are coordinated across industry and government, both domestically and on a global scale. It also demands that consumers have a voice when it comes to their privacy online. The best way consumers can exercise their right to privacy online is by demanding more accountability and transparency from technology companies.
And technology companies can make consistent efforts to better educate consumers on how they are handling their data as part of their core business model. A section on their website about how they handle customer data is a good starting point.
