Customer data is a treasure trove in today’s digital world, with businesses gaining copious insights for optimized marketing campaigns, personalized consumer experiences, and innovation. At the same time, corporations are responsible for protecting data as cybercrime and data breaches become more widespread.
The leaking of personal information could prove dire for companies, especially if they haven’t prioritized the risk of exposure. Many face customer distrust, hefty fines, and public scrutiny when systems are compromised, forcing everyone else to consider the ethics of customer data collection and use.
Ethical implications for using customer data
Cybercrime and data breaches are all too prevalent in the digitized landscape. The Federal Bureau of Investigation’s most recent Internet Crime Report says its Internet Crime Complaint Center received 880,418 complaints with losses worth over $12.5 billion in 2023 — 10 percent and 20 percent more complaints and losses than were reported in 2022.
In June 2024, Change Healthcare — owned by insurance enterprise UnitedHealth Group — announced a ransomware attack on its systems. This event put one-third of Americans’ data at risk of exposure, including their names, addresses, birth dates, social security numbers, and billing information.
Although UnitedHealth Group paid a ransom of $870 million to one of the hackers for the data breach and Change Healthcare began notifying patients, this is far from the only major leak this year. Cyberattackers have grown savvier, with schemes becoming more intricate and data more vulnerable to involuntary disclosure.
Experts suggest the rise in cyberattacks results from ransomware gangs stealing victims’ data instead of solely removing access. Likewise, cybercriminals have taken advantage of companies migrating to the cloud without fully understanding or setting up privacy configurations. The subsequent glitches and errors make it easier for hackers to infiltrate systems and steal sensitive information.
6 Ethical considerations to protect consumer data
Customer data collection has several benefits, including improved efficiency, more strategic business decisions, and personalized client experiences. However, the likelihood of breaches has made this practice risky, with customers uncertain about sharing personal details. Here are six ethical considerations enterprises should reflect on when collecting, storing, and using customer data.
1. Transparency and permission
Transparency means communicating what data a brand intends to compile, how it will collect it, and with whom it will share it. It should state this clearly in its privacy policies.
Companies must also allow customers to access, validate, or delete their data if requested. Likewise, individuals must approve of their data being collected and used.
2. Data lifecycle management
Firms should consider data lifecycle management, from collection to deletion, and how they store and archive it. A customer relationship management platform is an excellent place to keep customer data in one location, allowing staff to manage it more easily.
However, governance policies should be in place for this, such as limited data access and assigned tasks to select individuals. Whoever does not require the information should not be allowed into the program or have the ability to view or manipulate records.
3. Data minimization and purpose limitation
Data minimization means collecting only the most relevant customer data for an organization to meet its objectives. This means it must not over-collect data on the off chance it could use it later.
Likewise, it is crucial to employ the data only for the reason it was collected. For instance, information used in a transaction should not be carried over into targeted advertising. Instead, businesses should adhere to their initial purposes to build trust and confidence.
4. Enhanced Security and privacy
According to a 2023 International Association of Privacy Professionals survey, 68 percent of customers are concerned about online privacy. Their concern stems from their lack of knowledge about how companies and government agencies obtain, secure, and use sensitive information.
Firms should discuss and plan comprehensive security measures to protect customer data from breaches. Shoppers must also be reassured of heightened security and informed about the methods implemented.
5. Cross-border data transfers
Despite cross-border transactions being critical for global innovation, there is a much higher risk of data exposure, especially since different countries have various privacy laws and standards. As of 2023, 62 countries restricted international data transfers to protect people’s personal information.
Brands should be aware of other countries’ data-related mandates before they transfer details overseas. Releasing information to a country with weak protections increases security risks. Robust encryption and explicit customer consent can improve mitigation methods and ensure greater privacy.
6. Culture of data ethics
When using customer information, widespread organizational backing of data ethics is essential. Ethical data practices must be ingrained in corporate culture from senior leadership down.
Managers should enforce the importance of data security among teams. Meanwhile, all employees should undergo comprehensive training to detect cybercriminal activity and make responsible decisions when handling sensitive information.
Open communication among staff regarding data confidentiality and related concerns must also be acquired behavior. Workers should know who to contact with questions or to report potential breaches without fear.
Ethical customer data demands a thoughtful approach
Data protection goes beyond compliance — companies have a responsibility to individuals to use their information responsibly and avoid a breach. Prioritizing transparency, data minimization and enhanced security will help build trust and loyalty between businesses and consumers.
Zac Amos is the Features Editor at ReHack, where he covers business tech, HR, and cybersecurity. He is also a regular contributor at AllBusiness, TalentCulture, and VentureBeat. For more of his work, follow him on Twitter or LinkedIn.
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