New CA study shows consumer spending has declined because of diminishing trust.
Trust is the currency of the digital economy—according to a recent study by CA Technologies, in the past twelve months, consumer spending online has declined because of diminishing trust.
Combining this data with a recent Kleiner Perkins Internet trends report in May, Internet use is now at 50 percent market penetration, and new Internet user growth is declining to 7 percent vs. 12 percent in 2016. These findings should alarm business leaders engaged in initiatives to unlock the Internet “value chain”, because even though Internet usage remains strong, businesses will have to work harder to create brand affinity and inspire consumer participation while competing to find growth in an increasingly crowded digital economy.
So how much is trust worth—the value at stake, according to the World Economic Forum, is over $10 trillion in global growth in the next decade. That equates to about $100 for every man woman and child on the planet.
According to the CA study, a dramatic rise in data breaches has made consumers more cautious of online activity—in the US alone, 16.7 million people were victims of identity theft which is prominent because it translates to 1 in 15 people. At the same time, consumers are becoming more aware of the “surveillance capitalism” aimed at capturing, analyzing and monetizing their private information.
“To participate in today’s global economy, ordinary people must accept an asymmetrical bargain: their lives are transparent to states, banks, and corporations, whereas the behavior and inner workings of the powerful actors are kept hidden.” (Scientific American Jan 2018)
To provide a macroeconomic view of why consumer activity data is so valuable, the World Economic forum projects “over $900B in new growth directly from leveraging consumer data to compete, sell and operate more effectively.” (WEF 2018) Simply put, going forward, people will only share data and do business with brands they trust.
To unlock this potential, companies must do three things to build trust:
- Reduce the risk of embarrassing data breaches and secure consumer identity
- Transform the business to deliver trusted experiences
- Empower consumers with more control over what private data is stored, what behavior is tracked and how data is aggregated and shared
Prevent data breaches
The paradox of customer data is that “less is more”—to persuade people to share more data, you need to store less data. If the information isn’t necessary for audit compliance or to fulfill the business objective, it probably shouldn’t be kept.
According to the CA digital trust study, 48 percent of consumers stopped using a service after a reported data breach. Tracking behavior to sell the data is a bad thing – tracking behavior to detect data breach is a good thing.
Today, very few companies have deployed technologies that record user behavior so that they can monitor the history of activity – this is the digital equivalent of installing a bank vault without putting a camera into track who is entering and leaving.
Companies that can prevent and detect breaches will not only deliver better business results but reap the rewards of consumer trust. According to the CA study, 50% of business executives whose company had a publicly disclosed data breach, say that they’ve felt strong, long-term impact of a data breach on business results.
Deliver trusted experiences
According to the CA study, 86 percent of consumers would opt for a secure experience over a convenient experience. Today 80 percent of data breaches are linked to lost stolen or weak credentials—putting controls in place to verify the user’s identity like multi-factor authentication, better risk analytics to determine a transaction is fraudulent will inspire consumer confidence.
Lower digital trust correlated with lower spending online—organizations have to realize that the experience of the products or services is becoming more important than the products or service itself and security is a pre-requisite. In the digital economy, IT security culture is perhaps more critical than responsive customer service.
Empower consumer consent
“If data is the new oil, companies left, and right have been storing that metaphorical oil in the equivalent of rusty barrels and cardboard boxes.”(Danny Rogers, Forbes 2018)
Software is eating the world, and the data companies collect with software provides the power to shape behavior. In some cases, this can deliver new services that delight consumers, and in other cases, utilized in ways consumers never intended.
Privacy laws have not caught up with the advances in digital surveillance—commercial institutions now possess surveillance technology that rivals most governments in the world. According to the CA study, 89 percent of business executives agree that it is important to invest in technologies to protect consumer data.
The solution is simple—when collecting information, companies need to disclose data usage transparently. As an on-going part of customer relationship management, companies should provide the online capability for customers to manage behavior tracking and data sharing. Recent research by Forrester supports this perspective “today technology has enabled consumers to have a say in what a company stands for – enterprises must shift from a company-centric view to a customer-centric view that creates emotional brand experiences.” In the digital economy, the online security experience will define the brand experience.
Every company today is trying to adopt game-changing technologies which will provide the insight they need to adapt and change quickly, but this means convincing consumers to continue sharing data. Consumers will not share information with companies that can’t be trusted to secure data from hacking and provide transparency on how data is being collected and used.
More than ever, in a world of data brokers and “surveillance capitalism,” consumers need to feel empowered because their participation drives the new economy. When it comes to data sharing, companies have to rationalize corporate benefit with consumer benefit – according to a Deloitte study, 79 percent of consumers are willing to share personal data where there is a definite benefit. In the digital economy, the companies that can build trust and provide transparency win.