Reasons Why Customer Privacy Concerns Are Becoming a Key Business Issue

Introduction

Consumer privacy may be defined as a consumer’s right to protect the rate and the extent to which their information is accessed. More often than not, companies are keen on dealing with consumer privacy both for the sake of the consumer and for themselves. This is large because business environments are frequently bombarded with unwarranted occurrences such as theft of credit card numbers, information leakage, and unauthorized transactions. Different businesses have implemented policies and procedures to deal with consumer privacy. The paper shall look at some of the reasons that could be causing this shift.

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Presence of laws and rules governing information sharing and privacy

In this world of corporate expansions and mergers, it is often common to find several firms operating under different brand names but pledging their loyalty to one major brand. Besides this, some corporations may operate independently but may still rely on another firm for supplies, human resource management, information technology management, and many other operational functions. This means that such companies may have to share consumer information from time to time. (EPIC, 2000)

The government has realized that such conditions exist and has passed laws and regulations to restrict some of these instances of information sharing. Therefore, it can be said that businesses have become increasingly concerned with consumer privacy issues because failure to do so may place them in breach of industry laws and policies. While many other reasons may be propelling companies towards protecting consumer privacy, statistics have shown that one of the most important is compliance with external laws. A study carried out over the past few years indicates that close to eighty percent of companies and organizations within the United Kingdom comply with rules and regulations on consumer privacy. Industries that were largely represented in this survey emanated from the financial as well as the health industry.

Those companies that fail to abide by these rules and regulations on consumer privacy may find that they have to deal with a series of both criminal and civil cases. In certain circumstances, the cases may be brought on by the government or even by consumers.

Several businesses have had to pay huge fines because their users were outraged over the lack of protection of their personal information. Such companies may have to allocate so much money in endeavors that would ruin business for them in the future. A poll carried out by the Tech Republic during the year 2006 found that approximately sixty-six percent of all corporations in the region want to boost their consumer privacy issues to boost their image and also to maintain consumer loyalty. (Peeples, 2007)

It should be noted that the current body of legislation and laws on consumer privacy may affect a certain company if it is found that that company is lying to its consumer. In other words, it may be possible to find that certain companies possess a privacy statement but do not provide the services that are provided in these privacy statements. Doing this could lead to a lawsuit against that specific company.

In other situations, it may be possible to find that a company does not possess a privacy statement and so there is no way of knowing how information is collected or utilized by these firms. In such scenarios, it may be common to find that a client’s security has been breached and this may place the responsible company in trouble. In other circumstances, some corporations may possess privacy statements but they may intentionally provide wrong information in those statements. Any of the latter incidents could lead to the passing of a lawsuit either by the government or by clients.

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Media publicity on consumer privacy

With the advent and growth of e-commerce, many consumers are vastly becoming aware of their rights and privileges. A lot of information is available to them concerning what they are entitled to do when doing business with any company. Aside from this, consumers are highly informed about the repercussions that could emanate out of failure to maintain their privacy. One of the major sources of such kind of information is the internet; others include newspapers, television, and the like. These media sources have frequently talked about what could happen to an individual once their information has been used for unintended purposes. (Pamela and Leon, 2005)

In the recent past, news reports have highlighted how the government has sometimes used consumer information without due consent. They have discussed some of how governmental agencies can access such information and abuse it without consent from concerned parties especially when it comes to personal information. There are also numerous reports in the media about the dissemination or sharing of an individual’s medical history. The latter form of intrusion into consumer privacy is especially common among insurance companies. These firms tend to shy away from potential consumers who may have a complicated medical history. By unfairly obtaining information about its future clientele, health insurance consumers are placed at an undue advantage.

Besides this, media discussions have shown that several firms looking to hire new employees may access employee medical history to find out whether such individuals may cost them. Such moves also place employees at an unwarranted disadvantage as selection criteria should be merit-based and not medically based.

Media revelations have also shown that identity theft is increasingly becoming an area of concern. Some consumers have lost thousands of pounds as a result of the invasion of their privacy. Others have found that their personal information has been altered and so they cannot be able to carry out business transactions normally. Usually, these media reports have shown that this kind of crime is often possible because there are so many avenues that potential criminals can utilize to get personal information. Identity theft has also taken its toll on several companies because those that were not concerned about the protection of consumer information now possess a tarnished corporate image.

Perhaps one of the most prevalent media stories covered is the issue of credit card theft. Credit card numbers are usually accessed by computer-savvy individuals or crafty ones who can extract such information from negligent businesses that are not keen on protecting their consumers’ privacy. Usually, such stories have indicated how easy it is for carelessness to lead to a lot of loss. (Cheang, 2008)

All in all, it can be said that many people within the UK region and indeed the world have become very apprehensive over their personal information. These concerns have been generated from alarming media reports and statistics. On top of this many individuals within the region are well aware that it is their right to be protected from invasion of privacy. This is large because the government has passed laws designed to tackle this very problem. Since it is the job of any serious business to stay abreast of consumer expectations, then part of their provisional duty is to ensure that their consumers’ privacy is protected. This can be a source of competitive advantage for those firms that are serious about maintaining or heightening their sales/ profits.

The presence of online transactions

Almost all major businesses in the world possess company websites. This has been brought on by the advent and proliferation of the internet. These days, businesses may carry out transactions with consumers who are miles away from them in real-time. To ascertain a client’s identity, most companies may require consumers to give some information about themselves. Some of the things they may ask for include: billing addresses, credit card numbers, and many others. While all the latter information may be quite necessary to do business, there may be some instances in which this information can be misused. (Peeples, 2007)

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There are lots of reasons that could cause the latter scenario to occur however the major reason that could be propagating information misuse is the issue of privacy and confidentiality discrepancies. Several companies in the past assumed that if they had dealt with business confidentiality issues, then consumer privacy had also been handled. Most businesses imagined that consumer privacy was merely composed of technological approaches alone.

For instance, once a company had obtained information about a certain password, then they thought that their only duty was to store this information properly i.e. within the confines of their company network, and ensure that hacking does not occur through some technological means such as placing firewall encryption. While carrying out technological protection of personal information was an important aspect, there was a need to look at other elements in consumer privacy to do a wholesome review. The importance of taking holistic approaches has led to an increasing number of businesses being more concerned with the issue of consumer privacy.

Most businesses have now realized that some of the information that they request from consumers may not be that important. The following are some of the things that businesses have to choose when prompting consumers for that information;

  • Email address
  • Contact number
  • Home address
  • Birthdate
  • Gender
  • Passport number
  • Social security number
  • Name

If an individual was interested in carrying out a currency exchange, then some of the information being requested as seen above is too much. A company may have to choose between any one of the following to ascertain that they do not place their consumers at risk of being taken advantage of. When a consumer that possesses a lot of information about his / her privacy is asked to give all this information, that individual may opt to approach another company that may not require all this information.

This can make businesses lose potential clients. Such companies have had to reconfigure the kind of information that they request from their respective clientele. It can therefore be said that since the very definition of consumer privacy has changed; i.e. it has become more far-reaching. Therefore, businesses must look for ways in which they can make this a priority issue. (EPIC, 2000)

Online business transactions have redefined the concept of consumer privacy because now storage of consumer information is another issue. Many banks, insurance companies, and retail stores usually carry out online transactions. To seal such a transaction, a consumer will have to pay for it. More often than not, this is usually done through the use of a credit card. A company may request information linked to credit cards and then it may opt to look for ways in which it can confirm this information.

Usually, this means contacting the respective bank under whose name the credit card belongs. Also, it may be necessary to find out whether that consumer possesses adequate credit to meet the transactions’ costs. When this has been confirmed, the company can deliver the agreed-upon products or services. In the past, most companies would end up storing such numbers yet this may not be a necessary measure.

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With the advancement and growth of online transactions, companies have now realized that following such an approach is no longer effective. What a company requires is an authorization number. This means that as soon as the credit card data has been authenticated, then there is no need for companies to store it within their respective networks. Businesses have now begun adopting the latter strategy and those that do not carry out such measures may find that they are placed at a disadvantage when compared to their counterparts. Aside from that, consumers are also aware of this fact and most of them expect businesses to enact such processes.

Those well-informed consumers who find that a company does do such effective storage may move towards other companies. This reason has thus caused most businesses to boost their consumer privacy policies substantially. (Pamela and Leon, 2005)

In close relation to the latter mentioned issue is the challenge of separating information. Numerous companies with online transactions tend to maintain all the information regarding their corporations in one large network. This can cause such companies to be in a situation where unauthorized access can be carried out or where the company largely depends on a certain form of media backup. In case that backup is lost, then the firm may undergo substantial losses. Many businesses have realized that there are more effective ways of storing their information. This can be done through the separation of different categories of information.

For instance, all information required for authentication can be placed in one database while transactional information can be placed in another. In this regard, it may be possible to protect some personal information for clients in certain circumstances while at the same time prevent leakage of transactional data. In the end, businesses that take their consumer privacy seriously will be in a position where they can carry out their businesses effectively while at the same time heightening consumer satisfaction. This is the reason why so many companies are interested in prioritizing consumer privacy issues.

Generally speaking, those companies that fail to prioritize consumer privacy issues find themselves in positions where they may lose consumer loyalty. In addition, it may also be possible to find that some of these companies’ public images may be tarnished too. It has therefore become an issue necessary for survival in today’s highly competitive industries.

Concerns over handling certain sensitive demographics

Companies may find themselves in a situation where they are required to deal with some sensitive issues. For example, they may be required to carry out transactions with persons under the age of eighteen. Several issues have arisen over getting information from such young clients. Consequently, some children’s commissions have been set up to handle such challenges. Usually, these commissions give guidelines and procedures that must be adhered to by companies. For example, when a certain company requires personal data from a child, then it must make sure that it obtains consent from that child’s parents.

The issue of children’s privacy has come under a lot of scrutinies because children may not possess the capacity to distinguish what is wrong or right. In this regard, either the government or another third party may have to come into play to ensure that rights are protected. (Cheang, 2008)

The health industry is also another very sensitive sector when it comes to consumer privacy. This is large because a breach of patient data information and confidentiality could result in severe consequences to these respective parties. It may therefore be necessary for them to be protected. This is the reason why there may be several issues cropping up within the industry about commissions on consumer privacy within the health industry. Hospitals and other healthcare providers have to consider all these prohibitions since they are operating in a very strict environment.

Financial industry consumers are also another group that is considered sensitive and under high scrutiny. However, within this industry, the balance tends to be tipped more towards the financial service providers rather than their clients. This is largely because most financial institutions possess the right to share their information with other consumers as long as these consumers fall within a certain category. For example, if a customer requires a loan from a financial institution, the bank that is considering doing business with him possesses a right to investigate that customer’s credit history from another bank.

To meet this objective, it may be necessary to invade that consumer’s privacy. However, there are still certain boundaries that must be maintained when handling such sensitive matters as stipulated in the credit reporting laws. Consumers know their rights within such policy issues and it is, therefore, necessary for these firms to think of ways in which they can prevent these problems without losing their clients and breaching the law. (EPIC, 2000)

It should be noted that the marketing industry has drawn a lot of attention from several stakeholders in consumer privacy protection. This is large because of the phenomenon of consumer profiling. Many companies heavily rely on consumer profiling when coming up with their marketing strategies. As a result, most of them have had to obtain the information they require for consumer profiling in one way or another.

Consumers are normally concerned when the information deemed as private has gotten to the hands of a certain company as they may feel vulnerable. For instance, some companies may obtain information about a certain consumer’s preferences and may keep prodding them with notices about a certain product that fits into their profile. This may be a nuisance to the consumer. In this regard, businesses have to look for ways of dealing with such matters and one method is through consumer privacy protection.

Conclusion

It is often a big challenge to companies to balance their rights, earning enough revenue, consumer privacy among other factors. However, businesses have become increasingly concerned with this matter because some firms operate within sensitive industries, also, the government has passed privacy policies that oblige businesses to meet them. Besides that, companies must respond to the increasingly sharp and informed consumer to stay ahead. All these prompts have led to the presence of more consumer privacy concerns within the business arena.

References

EPIC (2000). Epic Drops Amazon on privacy Issues. New York: Gale Group Publishers.

Pamela, S. and Leon, D. (2005). “Current Issues in consumer privacy policies.” Journal of SAM advanced Management, 3(4): 19.

Cheang, A. (2008). Privacy issues. Security MVP Journal, 12 (2): 47.

Peeples, D. (2007). Customer data privacy gaining ground. Web.

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