Bank Regulation

Why Merchants Must Keep An Eye On Changing Data Privacy Perceptions

Eighty-seven percent of Americans believe data privacy is a basic right, so merchants can’t afford to miss the mark on safeguarding consumers’ information. Michael Reidbord, president of retail technology organization Fashion Tech Consortium, explains how merchants must juggle evolving regulations that address consumers’ privacy concerns.

Businesses and consumers are continuing to migrate to eCommerce and digital technologies eight months after the pandemic began.

The rise in online transactions also means more fraudsters are going digital to attempt the theft of payment or personal data, however. The heightened risk is leading both consumers and merchants to view online data security with fresh eyes.

Convincing customers that their payment and personal data is well-secured has become crucial to helping merchants retain their trust as commerce goes digital, said Michael Reidbord, president of retail technology organization Fashion Tech Consortium, in a PYMNTS interview.

“When stores are open again and everything is safe and we have a vaccine, I think we will have a high retention rate of people that are actually purchasing online,” Reidbord said. “The numbers may go down as far as the level of transactions, but I think that eCommerce is here to stay. And if it is, that means that data security is here to stay and will only — it has to — get better.”

Merchants have other reasons to keep an eye on changing data privacy and security trends. Competing in a world focused on digital commerce has made obtaining data about customers’ shopping habits indispensable to gaining insights for engaging and retaining them. Assuring consumers that their information is safe is therefore essential to maintaining their business.

Data Personalization Meets Data Privacy

More competition plus a higher rate of potential fraud means merchants must turn to several techniques to stand out and retain or grow their customer bases. Keeping consumers engaged and loyal was tricky before the pandemic, but it has become even more challenging now that their buying behavior is shifting based on the availability of brick-and-mortar stores, the adoption of alternative payment methods and their comfort levels when shopping with certain merchants.

“A lot of the big brands are doing a lot of customer recruitment right now,” Reidbord said. “Of course, they are trying to convert these sales, but they are also trying to build their brands, be super hip, be out front, have fresh new products all the time, and then recruit more [consumers] into [their] brands. … So, you have got to find ways to reach this audience so that you survive.”

This is why merchants desire access to a broad assortment of customer data that they can use to personalize consumers’ experiences, he explained. Customers must trust merchants with their personal information to make this a reality, however. He said that some merchants work to gain that trust by offering shopping incentives such as lower prices, sales or other unique opportunities.

“One of the biggest factors is predictive analytics,” Reidbord said. “How can we as a brand stop making what our customers do not want and actually start producing what they do want, making it in the right quantities, in the right colors and delivering it at the right time and holding the right amount of inventory? Well, the way to do that is by amassing an enormous amount of data.”

Earning consumers’ trust is not the only difficulty that merchants must overcome to gain information that can help them craft personalized customer relationships. Regulators are debating how online information should be stored and shared, and regulations in many markets now require consumers to give explicit consent before merchants can access their data. The global health crisis is putting these regulatory changes to the test as companies work to secure data belonging to a growing number of digital consumers. Failing to take these rules into account could ultimately eliminate merchants’ chances of accessing crucial customer information.

Consumer Loyalty And Data Privacy Rules

The pandemic may be having a greater impact on data privacy laws than expected. Many of the rules governing consumer data collection and security were established prior to the pandemic, including GDPR and PSD2 in the EU as well as the California Consumer Privacy Act (CCPA). These regulations have fallen under greater scrutiny as the ongoing crisis tests their limits, however.

Consumers are also beginning to question what these rules cover when sharing data online, especially as fraud becomes more rampant during the shift to eCommerce. Protecting customers’ information is therefore important for merchants in all sectors, Reidbord said — even those operating in an industry as seemingly innocuous as fashion.

“How many T-shirts [consumers] buy, or jeans, I do not think is so important,” he said. “But [with] all the ... financial data behind that, people are always going to be out there hacking. That is always something that people talk about on a daily basis: ‘Is my data safe? How much of [it] do I want to share, and what is happening with my data?’”

It is difficult to predict just how consumers’ opinions regarding data privacy and security will change once the pandemic ends or how regulators in the EU, U.S. and other markets will respond. What is clear is that missing the mark could cost merchants customers’ trust, loyalty and sales. Staying abreast of data privacy developments is therefore a matter of necessity for merchants — no matter what happens going forward.

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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