Data Privacy and Consumer Trust Part II
In this three-part blog series, we explore how data collection in the digital age has led to a breakdown in consumer trust, how blockchain technology seeks to solve that problem, and how to address the limitations of the blockchain solution.
Part II addresses the sharp decline in consumer trust that has occurred throughout the digital age and the ways that blockchain technology is disrupting the narrative. Read Part I here. Part III coming soon.
The evolving relationship between businesses and consumer data in the digital age has led to a near-total breakdown in consumer trust. Do you have full trust in the business that you’re buying from? The social media apps you spend hours a week using? What about the media companies that own your favorite TV shows? A 2022 PWC report found that only 30% of consumers have a high level of trust in the businesses they interact with, though 87% of business leaders believe their consumers trust their company. In some industries, consumer trust is even lower, with consumer-packaged-goods or media and entertainment companies trusted by only 10% of consumers surveyed by McKinsey in 2020.
Put plainly, consumers simply don’t trust businesses with their data. And when consumers decide that they don’t trust you with their data, they’re really deciding that they don’t trust you at all. Adobe found that 68% of consumers would stop purchasing from a company that used their data without their permission.
"When consumers decide that they don’t trust you with their data, they’re really deciding that they don’t trust you at all."
Consumer trust pays
Data integrity and security are vital to the cultivation and maintenance of consumer trust, and consumer trust is critical to a business’s reputation and, ultimately, revenue. Adobe’s 2022 Trust Report states that 44% of global consumers will spend at least $500 or more each year with the brands they trust most, with nearly a third saying they will spend more than $1000/year. And according to Accenture, one in five people are willing to pay at least 41% more in exchange for data security.
Ethical management of consumer data
Regardless of which side you’re standing on, the current relationship between businesses and consumers when it comes to data and privacy is simply not working. Business collection and use of consumer data is not going away, and neither is consumer distrust in how businesses manage that data. The only way to reconcile these issues is to create a new system entirely, one that satisfies both the business’s need to incorporate consumer data and the consumer’s desire for transparency and agency.
“The current relationship between businesses and consumers when it comes to data and privacy is simply not working.”
- Transparency: Nearly three in four customers will share more personal information if brands are transparent about how it’s used. Consumers want to know that their data is being used in a way that adds value to their experience and does not violate their privacy.
- Agency: Brands that prioritize user-control of data will increase lifetime value by 25%. Consumers want to own their data, and owning your data means being in control of who can access it and how it’s used.
Is blockchain the answer?
Some innovative companies have recognized the opportunity presented by the advent of blockchain technology. A blockchain is a decentralized digital ledger of transactions. Transactions on the blockchain are guaranteed to be accurate, tamperproof, and readily available to view and access by anyone. When it comes to data sharing, blockchains are used to provide a transparent record of exactly where, when, and how collected customer data is being used.
In October 2020, researchers from the University of Saskatchewan published an article exploring a potential use case for a hotel reservation system. In this example, the system collects user data and offers the user a reward for choosing to share that data with other travel service providers. A smart contract outlines the terms and conditions of how the user's data will be collected, used, and protected, and executes a reward payout automatically when the conditions are met, i.e. when the user provides the requested data points and gives consent for sharing. With a blockchain-based data sharing system, like the one outlined in this example, each user can see how their data is being collected, stored, and shared, and can control or revoke access to their data.
The privacy paradox
Blockchain technology solves the issue of user control quite elegantly, but it raises new concerns on the issue of privacy. One of the paramount features of a public blockchain is that every transaction is transparent—meaning able to be viewed and accessed by anyone at any time. So while blockchain technology offers users control over their data and the ability to share it securely, it also makes that data publicly accessible, which isn’t appropriate in cases where sensitive or personal information is being shared. In order for blockchain to be used as a viable tool for the management of consumer data, it has to reconcile with privacy.
In Part III, we’ll address the tools and innovations that are required to introduce privacy to the blockchain.