KuppingerCole Analysts' View on Consumer Identities
Trust, security and business benefit – Consumer identities done rightMatthias Reinwarth
The Digital Transformation is a game changer for many traditional organisations and a business enabler for many new trading companies and service providers in the digital world. When dealing with consumers and customers directly the most important asset for any forward-thinking organisation is the data provided and collected for these new type of identities. The appropriate management of consumer identities is of utmost importance.
Handing over personal data to a commercial organisation the consumer typically does this with two contrasting expectations. On the one hand the consumer wants to benefit from the organisation as a contract partner for goods or services. This should be as efficient as possible at a sophisticating level of user experience. Customer-facing organizations get into direct contact with their customers today as they are accessing their products and services through various channels and deploying various types of devices. It is essential to know the relevant attributes of that customer at the right time. The reasons for this are obvious: An improved user experience leads to customer satisfaction and thus to returning customers. User self-service leads to high effectiveness and cost-efficiency while speeding up processes.
Selecting the right items of information and a proper understanding of the quality and reliability of that data are essential management tasks. Customer identities are the result of the ongoing consolidation of data from various sources, including initial registration information, payment data, search requests, purchase history or helpdesk interaction. Consumers use various devices to access required services and they use different accounts in different contexts. Data gathered from external sources can be outdated, partially inaccurate or even deliberately wrong or misleading, especially when collected from social media. Business-relevant information is a superset of several types of information, including business-internal information, which has to be consolidated and assessed well.
On the other hand, the act of providing personal information to a commercial organisation will only be possible when the consumer can expect the required level of trustworthiness and security being applied to personal data. Trust is essential and losing this trust will inevitably endanger the business model and thus threaten the existence of an enterprise. This has been made evident by the high number of recent, massive data breaches. And losing trust into e.g. an online picture printing service or the payment card service provider potentially corrupts trust into many types of online services.
The key challenge is finding the right balance between collecting and consolidating all business-relevant data for the benefit of the consumer and the organization itself, while acting as a trusted custodian of data the consumer has entrusted the organization with. When aiming at long-term sustainable customer relationships it is mandatory to integrate the proper handling of collected, personal data into all business processes, while being compliant to regulatory requirements and data protection laws. This has to be accompanied by a continuous review and improvement process as security and compliance are evolving processes themselves.
Companies across multiple vertical sectors are encountering challenges and opportunities that are shaping the future direction of consumer identity-centric business. Faced with the erosion of revenues from the rapid encroachment of challengers into their traditional market strongholds, many companies are realising that data represents their most significant asset to provide added value to their customers in the future. Key to this transformation will be how companies manage users’ digital identity data better and position themselves as secure identity brokers/providers in a highly competitive market. The enterprise’s data sources are as diverse as billing and payments, the CRM database, web portals, social media and customer services which can then be translated with good analytics into improving the customer experience and relationship as a whole. The most transparent business opportunities are driven by insights based on user behaviour which when connected to business processes can drive actions. When automated and real-time, decision-making becomes quicker and more efficient.
For most businesses, leveraging consumer identity profiles was not seen as a value added service or a revenue generator. But it’s recommended for that to change by:
Until recently most users were oblivious to the personal information held by the public and private sectors, which when collated through sophisticated analytics offered comprehensive and often revealing profiles. Or at least they were. With the recent revelations on data breaches, users everywhere are very concerned about the security and the privacy of their online identity personas. The Snowden revelations inter alia have revealed the susceptibility of the records kept by governments as well as the private sector. It is only a matter of time before all organisations’ data handling comes under scrutiny, added to which the EU is bringing in legislation to harmonise how data is handled by all companies operating in Europe.
Today it’s clear that being a formal identity provider would not even cover the necessary infrastructure costs. But, given the revenue shrinkage elsewhere and the fickleness of customer loyalty, with cheaper alternatives emerging to providing key products and services, this is an ideal time for more companies to step forward and embrace the emerging requirements of digital identity management.
All industries are going to be affected by the legislative changes in digital identities, trust services, privacy and data protection that are coming to both the public and private sectors in Europe. Many businesses may consider becoming identity service providers as a luxury rather than a necessity to remain in business and succeed, but, if the opportunity is taken, the results could well turn out to exceed expectations.
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