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The dot.bomb
syndrome
Evan
Hendricks, editor/publisher of Privacy Times, based in Washington DC |
© Jean Lecointre, Paris
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Everyone
agrees that privacy is good for business. But is there a market for companies offering
to protect it?
While several firms
have recently suffered class-action lawsuits and public outrage over apparent intrusions
into customers’ personal data, American Express is one of a number of businesses
that may be blazing the right path from privacy to profits.
Last year, the credit card issuer rolled out “Private Payments,” enabling its customers
to go online and obtain “Disposable” credit card numbers that could be used for only
one online purchase. If the number was ever stolen after being used for a purchase,
it would be worthless.
A key lesson is that protecting privacy, in this case the credit card number, became
an “enhanced value” to an existing service. Moreover, American Express understood
that the credit card number was the “tip of the privacy iceberg”–it plans to roll
out a suite of related services, like anonymous Internet browsing, in 2001. Rival
companies, like Visa/Mastercard, are following the same trail.
Another company to watch is PrivaSys, of San Francisco, which has patented technology
to enable plastic credit cards to generate disposable numbers for each purchase.
PrivaSys does this by equipping the card with a calculator-styled key pad and LCD
screen, a very thin battery, and a special magnetic stripe. The cardholder punches
a 4-digit PIN into the credit card itself and–voilà!–the card generates the
disposable number.
But securing payments is just one part of an emerging privacy protection market.
Other firms are offering anonymous or “pseudonymous” browsing tools, packages to
control cookies–the strings of code that are planted on the user’s computer by websites–and
services to block hacker intrusion. Only time will tell which companies will control
niche markets or achieve critical mass.
What’s clear is that the nascent e-commerce industry badly miscalculated the importance
of privacy to their business model. For without privacy, there was no consumer confidence,
and without such confidence, e-commerce had no chance of fulfilling the short-term,
high expectations that initially sent their stock values soaring. The current shake-out
of the “dot.bomb” industry shows how costly this miscalculation over privacy was.
An
added but essential value
But
if you thought privacy was a big issue for e-commerce, consider the debate on the
wireless industry. Referred to as Mobile or M-commerce, this industry appears to
have unlimited potential to deliver information and location-based services, advertisements,
and discount coupons to cellular phones and hand-held wireless devices. M-commerce
risks hitting the major “privacy buttons”: constant surveillance via location-based
tracking; unsolicited ads clogging communications devices; detailed profiles of individuals’
interests and movements; and insecure payment mechanisms.
Nonetheless, the industry is showing signs that it has learned from the mistakes
of e-commerce. A few months ago at a workshop of the U.S. Federal Trade Commission,
leading wireless industry groups unveiled guidelines requiring companies to obtain
a consumer’s consent before collecting or using personal data. This wasn’t altruism:
the industry understands that consumers will not tolerate commercial services to
their cell phones unless they explicitly consent.
So far, privacy’s brief tenure in the commercial marketplace indicates that some
people are willing to pay extra to protect their privacy. But the more important
lesson is that consumers are unlikely to take more than a few extra steps to secure
their data. If they perceive that a given medium, like the Internet, is not privacy-friendly,
they either change their habitual uses or actually refrain from them altogether.
The likelihood is that privacy will become an “added value,” creating a market for
those who can integrate privacy into payment mechanisms without excessively burdening
the consumer. |
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