The value of consumer trust: How privacy can enable economic growth

Wednesday 23rd August, 2017

Generating value from data forms part of the economic and innovation agenda of many governments and organisations. Today’s data-driven economy is dependent on the free flow of personal information, allowing organisations to refine and target services, predict consumer behaviours and analyse market trends (amongst other benefits). 

There is strong evidence that robust privacy protections enable business objectives, by reassuring consumers and the public that their data is safe.1 As personal data continues to rise as a commodity, privacy and data security measures are increasingly vital to the economic performance of both public and private sector organisations.

Protecting against the costs of data breaches

Data breaches can cause significant financial and reputational loss to both private and public sector organisations. Organisations largely incur direct costs associated with resolving a breach and the Ponemon Institute estimates that the average cost of a data breach incident for an Australian company is $2.51m.2 However, arguably the most damaging cost to organisations is indirect – in the loss of consumer trust.

Consumers are increasingly aware of the privacy risks associated with the collection and generation of personal information, particularly as new technologies and methods for capturing information emerge. In turn, we are seeing consumers value, and become more protective of their personal information,3 driving demand for businesses and government to implement more effective privacy protections as a core element of their business practices.

Improving the privacy capabilities of organisations can considerably reduce both the direct and indirect costs of a data breach. By making the commitment to build privacy protections into the design of any new project or initiative dependant on the use of personal information, organisations can signal to consumers that they value their privacy. Such a commitment to privacy and data security is an enormous advantage, as consumers are more likely to transact with organisations that value their privacy.

Social licence for data reform and innovation

Organisations and government agencies that overlook consumer privacy run the risk of losing the consumer trust and social licence that digital transformation and disruption requires. It is essential for organisations and government agencies to actively engage relevant stakeholders ahead of major data reforms, to build confidence in the use of public data and establish clear boundaries for use where personal information is involved.

For example, Data Futures Partnership, an independent ministerial advisory group funded by the New Zealand Government, was established to engage the public as well as private sector and non-government organisations, to understand consumers’ expectations as to the protection of their data whilst exploring and communicating the benefits of the use of public data. The Partnership encourages organisations to consider a series of questions when seeking to use consumers’ data and make their responses available to the public. This process is designed to ensure that consumers are in a position to make an informed decision about the use of their data. The Partnership also provides a framework to assist organisations in engaging stakeholders for higher risk data reforms, such as where the use of the data may be novel or have a substantial impact on communities.

Transparency is key for organisations wanting to use and extract value from consumers’ personal information. By providing adequate privacy protections and allowing consumers to exercise effective control over their data, businesses and governments are better placed to gain the public trust necessary to enable their data innovation agendas.4

Maintaining positive relationships with consumers and key stakeholders is a vital element of any new project or initiative. In response to rapid technological change, many government agencies and businesses have already committed to protecting the personal information of consumers, by being proactively transparent about their information handling practices and implementing internal procedures to manage privacy risks. Shifting the perception that privacy is a barrier to innovation, to an opportunity to cement and gain consumer trust, will allow organisations to continue to use personal data in a sustainable way.

1 Acquisti, Alessandro, Curtis R. Taylor, Liad Wagman, ‘The Economics of Privacy’ (2015) 52(2) Journal of Economic Literature, 38.

 2 Ponemon Institute, 2017 Cost of Data Breach Study – Australia, (June 2017), 1. 

Deloitte, Deloitte Australian Privacy Index 2017

4 Office of the Australian Information Commissioner, Submission to Productivity Commission, Data Availability and Use: Inquiry Draft Report, December 2016, 6. 

This article was written by Emily Arians, Policy Analyst, Office of the Commissioner for Privacy and Data Protection. This post does not necessarily reflect the views of CPDP.