As US companies head into the new year, data privacy is one of the most fluid areas at the junction of business and security. On January 1, the California Consumer Privacy Act (CCPA) goes into effect, threatening firms with significant fines if they do not protect consumers' data and give consumers the ability to access and delete data or opt out of collection.
The risks of falling afoul of such regulations were made apparent in 2019. Data regulators have passed out significant fines, giving notice to hotel chain Marriott and air carrier British Airways, for example, that they may be fined £99 million (US$124 million) and £183 million (US$229 million) penalties, respectively, under the European Union's General Data Protection Regulation (GDPR), which went into effect in May 2018.
Financials firms — in one of the most privacy-mature industries because they are so highly regulated — continue to search for strategies that deliver privacy to customers while keeping as much data as possible accessible to power business. The average financial-services firm, for example, spent between $1 million and $2 million on managing their data privacy responsibilities, with the top expenditures going to enforcement of data-retention and classification policies, according to the "Data Privacy Maturity Study, " published on Dec. 18 by data management provider Integris Software.
"We are early in the journey, even with the most mature industry out there, because it is so heavily regulated, and it still has a way to go," says Drew Schuil, the firm's president. "Other industries — retail, for example — have a long way to go in terms of maturity and finding solutions to these issues."
After more than two decades of scattershot regulation and a scramble to collect as much consumer data as possible, legal protections for consumers are starting to take hold. In the United States — the home of technology giants, such as Facebook and Google, that make a business out of collecting data on and giving advertisers access to consumers — the CCPA will be a significant test for companies.
Firms for which data is not their major focus may struggle more to comply with regulations.
"Awareness in the US among consumers of these privacy rights has emerged very quickly, and the wave has hit a lot faster than we thought," Schuil says. "CCPA is kind of leading the charge. California, like with things such as car emissions, often becomes the de facto standard for policy in the US."
If the financial services industry is any measure, the costs of complying with regulations will be high.
The average financial services firm needs to access between 50 and 100 different data sources to determine whether its stored data is secure, according to Integris' study. While the average firm has 10 to 25 employees working on the data privacy team, 40% of companies need at least 50 people on their teams to adequately meet their data-protection responsibilities. The average team discusses data-privacy issues at least once every two weeks, the report found.
Some companies are hampering their business by adopting a strict strategy toward complying with regulations. At a previous company where Schuil worked, the compliance team took a strict approach to GDPR, deleting 98% of the company's Salesforce data, he says. The firm had to cancel events because it could not contact potentially interested customers in specific sales regions.
"The most knee-jerk reaction of conservative interpretations of the privacy law is let's lock down or get rid of the data," he says. "And that is not something you want to have happen to one of the most valuable resources a company might have — data."
Integris believes that technology can help companies meet their privacy obligations. Currently, most financial services firms see their compliance with privacy regulations as a massive cost center, he says.
"These companies have a deep interest in privacy, but the interesting thing is that it's heavily weighted toward non-technical folks — lawyers, governance folks, and compliance," Schuil says. "It has been a lot about process and workflow and policy, but now we are seeing organizations say, 'hold on, how are we going to get a handle on 200 data sources, when it's everywhere, unstructured and not automated?'"
Until companies stop reacting to regulations and try to create a unified business strategy that includes privacy, future regulations will just pose more challenges, he says.
"We are seeing many firms take the wait-and-see approach, not doing much to change their business and waiting to see what happens with the regulations — maybe the federal law will be watered down?" he says. "And then we see organizations really paying attention, creating cross-functional teams to really investigate and solve the issue of privacy."
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