By Kaijia Gu
On 25 May 2018, we cross the long-awaited threshold of the General Data Protection Regulation (GDPR), with the law ensuring that consumers can exercise their ownership and control of how businesses use their personal data.
For many companies, responding to changes in data regulation is a heavy burden – complying with GDPR is costing big businesses millions of euros each. But some are able to look beyond just compliance, and think about how to create innovative and profitable business models that were not previously possible.
With no more monopolies on current and historical consumer data, the ownership of data will go back to consumers, and businesses will have to work to earn their data through trust and rewards. Given how critical data is in creating compelling value propositions, this becomes a battleground to win valuable customers.
Take insurance policy renewals, for example. For many years, big insurers relied on lengthy quotation forms and clunky comparison processes to deter customers from switching insurers at the end of a policy period, and made most of their profit in renewal policies. But with GDPR in effect, consumers can request their current insurers to hand their data over to a competitor. So, at the click of a button, a major source of competitive advantage can be lost for incumbents.
To take advantage of this opportunity, consumer businesses across all industries should do two things. Firstly, they must convince consumers that they are a trusted custodian of their data. Being a well-known and respected brand helps, but companies also need to proactively communicate their data safety and privacy protection measures and explain how the data is being used. This is a prerequisite for any company to obtain consumer data or even conduct any business with consumers.
Once GDPR is embedded, consumers will increasingly realise how much their data is worth, and will expect value from it
Secondly, consumer businesses should create compelling value propositions using data. Once GDPR is embedded, consumers will increasingly realise how much their data is worth, and will expect value from it. This could be a better experience (a button-click instead of a long form), additional services (personalised fashion advice) or products (better rates for financial products). Those who can entice consumers to share more data will be able to create more interesting and appealing offers, which will then attract more customers and more data. It’s a virtuous cycle.
These two actions are the first steps to using GDPR as a competitive weapon. It can also be taken further, and used to create innovative and potentially disruptive business models. What if a trusted retailer or bank offered customers a data passporting service, for example? With customer consent, it would collect personal data from multiple sources such as other retailers, banks, insurers, telecoms companies, social media sites and wearable devices. It could store the information on its own databases with guaranteed protection of safety and privacy, and port data to a verified third party when asked and ensure it was deleted from the third party afterwards. Such a service would save customers the hassle of filling out form after form, and allow them to obtain the best products and services without having to vet the companies individually or worry about how the underlying data might be misused.
The changes brought about by GDPR will not happen overnight, as consumer education and awareness take time to build. However, those who can see the future now can start quickly and will leave those who are still just ticking the compliance boxes standing in the dust in a few years’ time.