Protecting Privacy And Loyalty: Securing Consumer Trust In The Digital Age

By Aqilliz  

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Without a doubt, loyalty programmes can make a big impact. Investing in a successful loyalty programme can not only help businesses retain existing customers but also increase referrals and boost credibility. Beyond that, they are considered one of the richest sources of first-party data which can be used for tailoring recommendations and developing personalised marketing campaigns. Unfortunately, these treasure troves of data also happen to be a honeypot for hackers and cybercriminals looking to exploit the system and steal sensitive personal information.

In the last two years alone, numerous loyalty programmes such as Marriott’s and Mastercard’s have been subject to data breaches that have affected millions of consumers. With cyber attacks on the rise, consumers are justified in wanting to keep their personal information to themselves. As the appetite for loyalty programmes and consumer data continues to expand, ensuring that privacy and security standards keep pace with its rapid growth will be the cornerstone to building trust and brand reputation.

The Rewards of Loyalty

It’s no secret that rewarding loyal customers is good for business — in addition to driving repeat purchases and improving your bottom line, they’re also a valuable source of customer data and can provide useful insights into who your customers are and what they’re interested in. This can then be used to create a better shopping experience, optimise marketing strategies and in return, build stronger relationships with your customers.

At the basic level, this might take the form of a birthday discount for loyalty programme members. Using a single data point — their date of birth — you can generate a reward that makes the customer feel personally appreciated. Going further, this could mean sending specific recommendations based on their preferences or offering a discount code for items related to their most recent purchase.

In order to cut through the clutter, loyalty programmes have to go from merely rewarding spend to rewarding engagement by creating personalised experiences with customer centricity in mind. Having a deeper understanding and appreciation for your customer’s needs as much as their circumstances ensures that every engagement with your brand is as relevant, convenient, and valuable to them as much as possible. However, the drive for personalisation is likely to come into conflict with growing concerns around the issue of data privacy.

To Share or Not To Share: The Privacy Paradox

You can be sure that the loyalty cards in your wallet know next to nothing about you, except maybe how many cups of coffee you still need to buy in order to get a free one. However, as shopping habits shift in favour of online alternatives, conventional loyalty programmes involving the use of physical coupons or punch cards are slowly being rendered ineffective. As they shift from paper and plastic to apps and websites, loyalty programmes are increasingly tracking a currency that’s much more valuable: personal data.

These days, retail and loyalty profiles can contain a smorgasbord of personal information — in addition to your billing and contact details, the loyalty programme probably knows that you usually get your fix in the early afternoon, your go-to order is a skinny latte, and that you pay with a Mastercard. If compromised, all this data — including personally identifiable information such as credit card details or email and postal addresses — can be collected, sold, and traded or even compiled for extensive profiles that can later be used for crimes such as identity theft. Even the loyalty points accrued in stolen accounts are worth a certain value, which can be sold by cybercriminals on the dark web.

Customers know that their data is valuable, and in the wake of so many breaches, consumers are much warier about sharing information for rewards. As such, a good rule of thumb for businesses would be to only ask for the information that you need, and nothing more. Letting customers know what you’ll be doing with their data, and giving them control over their information builds trust and reduces anxiety. When customers trust your brand and your products, they’ll willingly exchange their data with you.

Securing Data With DLT

In order to protect membership accounts from data theft, adding multiple layers of security such as two-factor authentication and data encryption at all stages is crucial to mitigating any breaches. It would also be a good idea to consistently monitor the accounts for suspicious activity, such as purchases close together in time but in different jurisdictions or a series of unusual redemptions that don't match past account holder behaviour.

By creating an immutable and time-stamped distributed database entry of every single transaction ever made, distributed ledger technology (DLT) not only makes each transaction and its record easily traceable but also renders them irreversible, preventing fraud or any other type of manipulation of the transactions. Additionally, due to the network’s distributed nature, the absence of a single point of failure reduces the overall vulnerability of the system. As a shared ledger, all stakeholders can benefit from having access to a full view of all transactions that have taken place on-chain. In this manner, DLT enables a trusted ecosystem for both brands and consumers. For more on blockchain-based loyalty programmes, head on over to our blog post on Rethinking Loyalty And Rewards Programmes With Blockchain.

In short, loyalty programmes are an excellent way to increase revenue, but collecting customer data always comes with risk. In order to minimise liabilities and maximise rewards, businesses should recognise that in the digital age, the real value of customer loyalty lies in trust — not rewards.

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