In an ideal world, data sharing is hassle-free and the transactional internet offers nothing but benefits. The only problem is, that ideal world doesn’t exist – at least, not yet. This article takes a closer look at how organisations can make better (i.e. smarter) use of the transactional internet’s potential. By providing effective control of data, they can restore people’s trust in data sharing – and trust is a fundamental prerequisite for all digital transactions.

The internet was developed in the 1990s as an information medium – initially for researchers, and later for businesses and consumers too. Since then, with millions of people a second now sharing massive amounts of data for a whole range of purposes, it has evolved into the prevailing transaction medium. But the internet is showing signs of strain. It isn’t designed to cope with data sharing on such a huge scale, and today’s users are never sure whom they can and can’t trust.

This has major implications for all digital transactions that involve the exchange of data – and that includes (financial) transactions – because they depend on trust. When purchasing a product or service, for example, the truly crucial moment is when the online customer has to decide whether to click on the ‘Buy’ button. They will only make that all-important click if they sufficiently trust that the transaction will be completed correctly. Hence, trust is key to the further growth of the transactional internet. 

Paradox

We are increasingly utilising advanced services that entail more data processing yet, paradoxically, our trust that companies will keep our data secure is diminishing. That lack of trust is understandable because it has been regularly breached in recent years: from consumer details falling into the wrong hands, to the sale of data to third parties and even banks abusing customer payment history for targeted marketing. Consumers increasingly take a critical view of the security and accessibility of (sensitive) information and the sharing of their data – and rightly so.

This lack of trust poses a sizeable challenge for companies because it automatically worsens their relationship with customers, which in turn makes them less willing to share their data. Less data means less relevance, and fewer customers means less revenue. Unless this vicious circle can be broken, it’s ‘game over’ for businesses.

Legislation alone is not enough

With legislation such as the General Data Protection Regulation (GDPR) and the Payment Service Directive 2 (PSD2), governments have taken the first step in the battle against ‘data pollution’*. Nowadays we have control over our own data, or at least that’s the theory. In practice, however, it appears that legislation alone is not enough. We are presented with countless pop-ups and lengthy statements containing complex terms and conditions and confusing choices, which we often blindly accept.

Data benefit balance out of kilter

Companies are tackling the lack of trust in today’s internet – and its technical unsuitability as a transaction network – by building platforms of their own. Platforms profit above all from the revenue generated by data. Despite consumers helping to generate the transactional data, however, they currently receive far from their fair share of the benefits. There is a growing sense that we have little to no control over what happens to our data and how others can use it for profit, which is contributing to the rising dissatisfaction. The ‘data benefit balance’ is out of kilter, and is currently weighted in favour of just a handful of global tech giants. That balance must be redressed in the consumer’s favour, and one way to do so is to put consumers back in control of ‘their’ data.

Data sovereignty through ‘soft’ infrastructure

This starts with data sovereignty which gives consumers and businesses control over their data assets without having to store the data centrally. This can be achieved by each data holder implementing a standardised and legally sound identity and consent mechanism.

Such a data sovereignty infrastructure enables data holders to control and monitor who is granted access to their data, to allow their data to be reshared between providers and to give consent to engage in a transactional relationship about the usage of their data. In return they receive a ‘data dividend’ in the form of a service, credits and/or some other kind of financial value. This will restore the data benefit balance in the transactional internet.

Now, business leaders, policymakers and politicians must come to realise that the societal benefits and economic impact of this ‘soft’ and invisible infrastructure for digital economic activity is essential to enable the next wave of digital growth and to make smart use of the transactional internet’s potential. They need to not only join forces, but also start taking action in their own organisations in order to give people back control over their own data.

The topic of data sovereignty is discussed more comprehensively in the recently published book called Everything Transaction. This book is available for download as of September 23, 2019, via the following link: https://www.innopay.com/EverythingTransaction

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*‘Data pollution’ refers to the abundance of data in the digital environment and the damage this can cause to citizens and businesses. It arises from the fact that people and organisations have been giving away massive amounts of data for decades.