IoT: the Internet of Trade-offs

PrivacyimageBlogThe wonder and promise of the Internet of Things see billions of devices communicating with each other, transmitting, collecting, and sharing data that allows decision-making without the need for human intervention. If the vending machine knows that it needs inventory, it simply calls for service, and a quick machine-to-machine (M2M) communication feeds an algorithm,, which then determines when other nearby machines reach a pre-programmed replenishment threshold, and a truck is dispatched, loaded with precisely the proper inventory. In these M2M transactions, data drives decision making, and there is little or no need for human intervention.

But when humans get involved, whoa! That’s a whole new ballgame! Retail purchase transactions, online or in-store, can involve a huge number of data points, and that’s when things get tricky. It’s one thing online to use cookies and other tracking methodologies to create user profiles, but it’s something else entirely to combine data from point-of-sale systems, security cameras, in-store beacons and digital signage to track consumer behavior, using it to predict future consumption patterns. If we combine camera data with beacon activity for specific brands or even individual products with point-of-sale purchase information, we now have an extremely detailed profile of customer purchase behavior.

Of course, some of that data is anonymous, and simply tracks the customer “purchase path”, time-in-store, product preferences and so on. But when POS information is included, we now have data tied to individual customers, including sensitive credit card information and associated buyer demographics. While this may truly be the Holy Grail for retailers, it also represents serious privacy challenges, and this is the tipping point at which consumers confront the trade-off between providing merchants tools to be able to target customized, highly desirable offers based on buyer behavior and the privacy issues that can result for data breaches, such as so many retailers have experienced over the past several years. The severity of these recent data breaches cannot be overstated, with serious implications for fraud, abuse and identity theft, but also terrible negative impact for those retail brands affected. When a customer has second thoughts online or at the checkout counter because of prior issues with a retailer, not only has the brand suffered serious damage, future sales may be severely impacted.

Our experience with our latest beta test using beacon technology to facilitate mobile marketing for small businesses is a case in point. Beacons can trigger a variety of promotional offers, coupons and other offerings, but interfacing with a variety of disparate POS systems for redemption means crossing that customer privacy barrier and asking consumers to allow personal data to be used for legitimate marketing purposes. When that data is used to generate relevant, meaningful promotions based on buyer behavior, many consumers will tolerate that as a fair trade-off. But if personal data is compromised or inappropriately shared in any way, valuable customers may be lost. Welcome to IoT: the Internet of Trade-offs.

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