Holly Armitage at BAE explores the privacy paradox and argues that banks that create clear and accessible communications can benefit from it
Modern business depends on the free flow of data. But humans are unpredictable creatures that create barriers to these flows. Whilst customers sometimes willingly share their personal information with third parties, they also profess to be more concerned than ever about privacy.
Meet the “privacy paradox”. It’s no secret that what we browse and buy online, the discount codes and exclusive offers we trade our email addresses for, create a treasure chest of information that is hoovered up and used by organisations of every kind.
The key to banks navigating this paradox is context: providing clear, accessible and transparent communication so that customers can make individual trade-offs and trust judgements, on a case-by-case basis.
With this kind of approach, banks can actually champion privacy as a competitive advantage.
Actions versus preferences
Consumers talk a good game on privacy. BAE Systems’ recent COVID Crime Index revealed that 84 per cent expressed concerns about their digital identity and personal information online. Yet, in reality, we share this information with third parties all the time.
Just take a look at the apps on your smartphone. One study from a few years back calculated that participants value their online browsing history at just €7 (£6).
The key to unlocking this paradox is openly communicating what consumers get in return for sharing their data and what the trade-offs are. A separate study revealed that, although people say they care about privacy, in reality, they’re willing to share some data when incentivised to do so. In this case, the prospect of free pizza was enough for the study’s subjects to put aside their own, and their friends’, privacy preferences.
So how can businesses, and financial institutions in particular, navigate this disconnect?
Earning our trust
Legal scholar Alan Westin carried out over 30 privacy surveys in 1978, enabling him to segment consumers into three distinct groups. The first, “Privacy Unconcerned”, are those who consider the benefits they get from sharing information outweigh the negatives.
At the other end of the scale are “Privacy Fundamentalists” who are most protective of their personal info. However, most of us sit in the middle category: “Privacy Pragmatists” who weigh up the pros and cons of sharing personal information on a case-by-case basis.
What does this mean for banks? It means they must earn consumer trust rather than assume it will be freely and automatically given.
Let’s be clear: trust isn’t an abstract concept. It’s a real and tangible asset with the ability to impact the bottom line of any organisation. Open Data Institute research has found that “an increase in trust does correlate with an increase in data flow, leading to an increase in value created.”
Context is king
To improve trustworthiness, banks must focus on the role of context in customers’ decision-making processes. Whether external or internal, real or imaginary, subtle or obvious, conscious or unconscious, context is key to the behaviours we exhibit and the choices we make.
In a privacy scenario, consumers might display different sensitivities when discussing medical and financial information versus talking about products and brands, for example. They’re simply making those pragmatic case-by-case assessments identified by Westin.
On the other hand, when context is missing, individuals often try to fill in the blanks, which might lead to misconceptions about privacy protections, or misplaced trust in how personal data will be used. If financial institutions don’t provide enough context as to why specific personal data is required from customers, it may not be forthcoming or it may be shared in a way that doesn’t match their privacy preferences.
The bottom line for banks
Privacy has become a mainstream issue over recent years, thanks to the introduction of the General Data Protection Regulation (GDPR) in Europe and a steady stream of big-name corporate data breaches. Now the pandemic has shone an even brighter light on the issue of data use and sharing. Financial institutions must respond to these changing trends.
It’s not enough to assume customers will want to share their data with you. Openly communicate what they’re getting in return. It’s also not enough to provide jargon-heavy privacy notices hidden away on a corporate website. This will only undermine trust and damage long-term competitiveness. Instead, banks must provide all the context customers need to make those ad hoc judgements about whether to share their data or not.
By providing easily accessible customer-facing communications on privacy policy, your organisation can evolve from one that regards privacy as a defensive activity, to taking an offensive stance.
The bottom line: trust and context are a valuable way to carve out competitive advantage in the information age.
Holly Armitage is Principal Strategist at BAE
Main image courtesy of iStockPhoto.com
