What is data privacy? Building a future-proof plan for scaling global business

What is data privacy? Building a future-proof plan for scaling global business

Personal data holds immense value for organizations. They use it to customize experiences, create targeted marketing campaigns and content, and bolster their customer service. As more commerce takes place online, consumers are increasingly asking, “What’s happening to all my data?”

This question has led to a new power dynamic in how brands treat data. Building consumer trust goes hand in hand with ensuring their privacy — especially for companies looking to scale across borders — which makes the topic of data privacy and protection a critical issue for growing businesses.

What is data privacy and protection?

Data privacy and protection refers to the proper management of sensitive data like Personal Identifying Information (PII). This kind of data requires the highest level of security in how it’s collected, stored, shared, and analyzed.

In the “real” world, it’s relatively easy to know if your privacy is being invaded. In the digital sphere, however, it’s much more difficult to know when someone is accessing information they shouldn’t be, which means it’s harder to monitor and protect.

The shifting landscape of data privacy and protection

Previously, companies could do whatever they wished with consumer data. They were considered the rightful owners of the information they collected. In fact, data is the most valuable resource that companies in the digital economy have. However, shifts in consumer preferences are now driving companies to change how they collect and use data.

The majority of consumers want personalized engagement from companies, but only if it comes with transparency and control. If businesses want to build consumer trust, they must be honest about how they plan to use consumer data and provide them with enough control of their own information.

A cookieless future

Using tracking technology like third-party cookies, companies can quickly and easily collect and generate huge amounts of data. They then use this to build customer-pleasing experiences that also drive conversations and increase lifetime value. That’s a win-win, right?

In reality, customers have become wary of data collection technology that isn’t transparent or doesn’t allow them to control how it’s used. Twilio’s 2022 State of Customer Engagement Report revealed that 71% of consumers want greater data privacy from brands, meaning those tasty cookies are about to be cut out of marketing diets worldwide.

Cookies and other tracking technologies have been under threat for many years due to their privacy- invasive nature. They enabled a hidden, pervasive way of tracking, which consumers didn’t fully understand. Now, a combination of increased regulation, enforcement action, and withdrawal by Big Tech has led to the demise of tracking cookies. For example, Firefox and Safari have already shifted to cookieless browsing while Google has announced its phase-out plan will take effect in late 2024.

How are companies meant to provide personalized experiences without the data? Marketers are innovating new ways of enticing consumers to give personal information directly to brands. Using surveys, lead generation forms, and website tracking analytics (no third parties involved), companies can still gather plenty of valuable data about consumer preferences and behavior. In exchange for first-party data, however, businesses must be able to offer customers the transparency and control that weren’t available with third-party data collection.

Emerging laws and regulations: Data privacy is now a human right

Personal data in the wrong hands can significantly damage individuals, organizations, and communities. As more people view their data privacy as a fundamental human right, lawmakers worldwide have enacted legislation protecting consumers and ensuring their data is handled with care.

Cybercrime laws, e-transaction laws, and other consumer protection laws vary by region and industry. Healthcare institutions and those maintaining financial data are the most obvious handlers of sensitive information. Naturally, they must work with stricter legislation than an online shoe store or streaming subscription.

However, any organization that handles personal data needs to stay current with new and existing legislation. As consumers learn more about how data usage impacts them, organizations that ignore the resulting changes could be risking more than they can afford.

In the last five years, we’ve seen exponential growth in privacy laws and global regulatory enforcement action. The most well-known acts of data privacy legislation include:

• The European Union’s General Data Protection Regulation (GDPR).
• The California Customer Privacy Act (CCPA).
• The Health Insurance Portability and Accountability Act (HIPAA).

In 2022 alone, at least 35 states considered or introduced nearly 200 consumer privacy bills. Colorado, Connecticut, Virginia, and Utah also have privacy and protection acts due to take effect in 2023.

Additionally, citizen-led organizations like NOYB (European Center for Digital Rights) are working to strengthen people’s individual rights to data privacy. They search for loopholes in legislation to keep both regulators and businesses apprised of the latest threats to data protection and methods for protecting consumer rights. Tech companies are in a tricky but fascinating spot at the moment — caught in the convergence of consumer, government, and market forces that are driving fast and furious changes to the global flows of data. This is driving businesses to a direct-to-consumer business model, which enables businesses to build direct, personal, and memorable relationships with their customers.

The price of ignoring data privacy and protection

Privacy teams at globally scaling companies often struggle to track and keep pace with new legislation. That challenge, however, is nothing compared to the devastating effects of failing to comply:

• Irreparable damage to the company’s reputation.
• Loss of trust and loyalty from their customers.
• Hefty fines issued by Data Protection Authorities.

The European Union GDPR — considered the world standard in data privacy and protection — doesn’t pull punches when it comes to fines. Severe violations can run upwards of 20 million euros, or 4% of the company’s annual revenue, whichever amount is higher. Less severe infringements can range up to 10 million, or 2% of the company’s annual revenue. To date, one of the largest penalties for non-compliance was over 700 million euros, issued to Amazon Europe for its nonconsensual advertising targeting system.

Misused or compromised data can have harmful impacts on consumers as well. They can be mere annoyances, such as spam emails and too many targeted ads. However, in cases like identity theft and financial fraud, the consequences can be much more destructive.

Today’s consumers know the potential risks of giving up their data. They don’t look fondly on companies that share their information or fail to protect them from data breaches. In Twilio’s 2022 State of Customer Engagement Report, consumers are very clear about the action they would take if they found out their data was being poorly handled:

• 40% of consumers say they’ll cut off communication with a brand that breaks their trust around data protection by unsubscribing from its newsletter.
• 38% say they’ll stop purchasing from that company.
• 10% say they’ll denounce the company or report it to regulators.

Building a future-proof privacy strategy

Trust goes a long way with consumers — and it can make a big difference when it comes to choosing one brand over another. As organizations look for ways to stay agile in this constantly changing landscape, data protection is becoming a market differentiator and key requirement to remain competitive in the digital economy.

Given the harm that can result from sleeping on data privacy and protection, businesses need to have a privacy strategy that involves proactive compliance. More than ever, consumers are keen to enforce consensual use of their data, and some businesses are taking the bold step of meeting that demand even before government regulations take effect.

One of the ways tech companies can develop products and stay current with ever-shifting regulations is by engaging with tools that have data protection built in. Privacy by design involves proactively injecting security touchpoints throughout the entire product life cycle. This way, developers can swiftly meet regulatory changes without disrupting processes or causing stress to their teams.

Curious to learn more about privacy by design? Check out how Twilio builds privacy into every solution and process to safeguard data so companies can build trust from the get-go and maintain a competitive edge amidst rapidly changing laws.