Are digital freebies nothing but a data-grab?

RapidVPN/ July 3, 2020/ Blog/

The issue of data misuse of 50 million people has become relevant after the cases of Cambridge Analytica research firms. There was an enormous amount of consumer data available that are valuable assets of companies. Customer loyalty cards, while rewarding shoppers with discounts and deals are one easy way for companies to collect data on a large scale. Retailers need to make sure if they are giving healthy benefits they are getting a high-value customer in return.

Nowadays, gifts that companies reward their customers for loyalty are becoming more current. They are promotions that are meant to make you buy and use their products and services.

Why do they do it?

Loyalty programs and promotions are mostly a tactic employed by retailers and service providers to attract new customers, retaining existing ones, and prompt existing customers to increase their spending.

Even in cases where you aren’t paying in money, you’re paying for it by trading your personal information. Some uses of your shopping information can seem innocuous enough. You give those businesses access to what you buy, and they give you discounts or even freebies for spending money with them.

They are an easy means to earn freebies or deals on products that you will buy anyway. They are also a way to lock customers into their ecosystems. And as much as these rewards and loyalty programs are convenient and enticing, there is a secret/hidden/less obvious trade-off. Even in cases where you aren’t paying in money, you’re paying for it by trading your personal information.

Data brokers

It’s no secret that your data is routinely bought and sold by dozens, possibly hundreds, of companies. What’s less known is who those companies are, and what exactly they do.

Most companies aren’t upfront about what kinds of data they collect and for what purpose — instead of resorting to dense legalese and vague phrases like “personalization” and “better customer experience.” Retailers can also enrich the data they have collected about you from reward cards by buying customer data from third-party companies, known as data brokers.

And they aren’t entirely misleading. But this information is also used for other purposes, like targeted advertising. All that information can be used to create profiles of you—think of them as virtual, possibly erroneous versions of you—that can be used to target you with ads, classify the riskiness of your lifestyle, or help determine your eligibility for a job. Like the companies themselves, the risks can be hard to see. Apart from the dangers of merely collecting and storing all that data, detailed (andoften erroneous) consumer profiles can lead to race or income-based discrimination, in a high-tech version of redlining.

It’s simple MO

Data brokers gather as much personal data as possible from hundreds of millions or even billions of users. They either buy data from retailers or they gather it themselves (do you remember all those entertaining quizzes on social networks you have recently taken?). They can also exchange this data with one another. According to a specialist from the business who wished to remain anonymous: “Commonly, each company manages a different kind of data so it makes perfect sense to barter it.” No matter what method they choose for data collection, it always leads to the accumulation of huge databases. A few years ago, when the American Federal Trade Committee (FTC) mapped this sector, it came out that data brokers were storing up to three thousand different attributes on individual consumers.

Data protection

All organizations processing personal data must comply with data protection law and each company has a data privacy policy.

“This will include details of what data they can collect, how it can be used, and whether (as well as to whom) the data can be sold on,” Dr. Garfield Benjamin from the University of Birmingham’s Centre for Cyber Security and Privacy explained.

“There is an increasing need for greater transparency in this process – we all click ‘agree’ to lengthy and often confusing terms and conditions without necessarily being able to understand them.”

Although stores will often not pass loyalty scheme data to other parties, they may share customers’ information with companies within the same group, which can be global.

Some companies may also share the information with their retail partners, who can use it to target their advertising.

What to do?

In this era of online life, trading personal information for convenience appear to be de rigueur — and that’s assuming people understand they’re making an exchange at all.

This isn’t to say you should shut down all your accounts and disconnect from the internet. After all, loyalty, reward programs and the gamut of digital freebies exist so that they can benefit you by saving you some cash. But they also hinge on you voluntarily sharing your data. And once your information gets out into the public domain, you can never get it back.

Additional sources: New York Times, The Economic Times