Consumer-permissioned data refers to information that consumers voluntarily share with organisations, typically through digital platforms or applications. This can include financial data, health records, social media profiles, and more.

As of March 2024, 76 million consumer accounts were sharing their financial data via the Financial Data Exchange (FDX), an increase of 11 million accounts since October 2023. This figure reflects rising consumer trust in standardised data-sharing models.

Below is an explanation of what businesses should know about consumer-permissioned data: what it’s used for, how it can benefit businesses, and best practices for managing and implementing it.

What’s in this article?

• What is consumer consent?
  
• How businesses use and share consumer data
  
• Why consumer consent in data sharing is so important
  
• How consumer-permissioned data benefits businesses
  
• How businesses can implement consumer-permissioned data
  
• Challenges and solutions in managing consumer-permissioned data
  
• Best practices in managing consumer data
  

What is consumer consent?

Consumer consent – consumers deciding what information to share and with whom—is at the crux of consumer-permissioned data. Consumer consent must be all of the following:

• Informed: The consumer must be aware of what data the business is collecting, how they will use it, and with whom they will share it. The business should communicate this information in a clear, easy to understand way.

• Voluntary: The consumer must give their consent freely, without any coercion or pressure. They should have the option to refuse consent without facing negative consequences.

• Specific: Businesses must obtain consent for each specific purpose for which they will use the data. Blanket consent for unspecified purposes is generally not considered valid.

• Revocable: The consumer should be able to withdraw their consent at any time.

How businesses use and share consumer data

Consumer data is a valuable asset for businesses. Businesses use and share consumer data in a number of ways.

How businesses use consumer data

• Product development: Consumer data influences the development of new products and services. Companies analyse purchasing patterns, feedback, and preferences to understand what consumers want and need.

• Marketing and advertising: One of the most common uses of consumer data is in marketing and advertising. Businesses use demographic information, browsing behaviour, purchase history, and social media interactions to personalise recommendations, targeted ads, or customised content. This helps them reach the right audience and increase the effectiveness of their marketing efforts.

• Risk assessment and fraud prevention: Financial institutions and insurance companies use consumer data to assess creditworthiness, calculate insurance premiums, and detect fraudulent activity. This helps them manage risk and maintain secure transactions.

• Operational efficiency: Companies might analyse data on customer service interactions, website traffic, and purchasing behaviour to improve operations. This could involve redesigning websites, simplifying supply chain management, or improving customer service processes.

• Market research: Businesses often use consumer data to conduct market research around customers’ opinions and behaviours. This helps businesses understand market trends, identify opportunities, and gain insights into consumer behaviour.

How businesses share consumer data

• Within the company: Different departments within a company might share consumer data to collaborate on marketing, product development, or customer service initiatives. This is done in compliance with internal data governance policies.

• With third-party service providers: Businesses often partner with third-party service providers for data processing, analytics, marketing, or customer support. These providers might have access to consumer data but are generally bound by contractual agreements to protect it.

• With advertisers and marketing platforms: Businesses might share consumer data with advertisers and ad networks to facilitate targeted advertising. This often involves anonymised or aggregated data, but in some cases, it might include personal information.

• With affiliates and partners: Companies might share data with affiliates or business partners for cross-promotion, joint marketing campaigns, or other collaborative efforts. This is usually done with consumer consent or under the terms of a privacy policy.

• Through data brokers: Data brokers are companies that collect and sell consumer data from a variety of sources. They aggregate this data and create detailed profiles of individuals, which they sell to businesses for marketing, risk assessment, or other purposes.

• In mergers and acquisitions: If a company is sold or merges with another company, consumer data might be transferred as part of the transaction. This is usually disclosed in the terms of service or privacy policy.

Why consumer consent in data sharing is so important

Consumer consent is key to the data-sharing process for ethical, legal, and business reasons. Here’s why it’s so important.

• Consumer rights: By making consent necessary, laws ensure that individuals are aware of how businesses use their data, and have the power to revoke consent, request data deletion, and obtain data portability.

• Privacy protection: By requiring consent, systems protect personal privacy, ensuring that data is not used without the knowledge and agreement of the individual.

• Data laws and regulations: Directives such as the General Data Protection Regulation (GDPR) in the EU and the California Consumer Privacy Act (CCPA) mandate that organisations obtain consent from individuals before collecting, using, or sharing their data. Failure to comply can result in substantial fines and legal action.

• Consumer trust: When a company asks for consent and respects users’ choices, it builds trust with consumers.

• Brand reputation: Mishandling data or ignoring consent requirements can lead to scandals or public backlash, which can damage a company’s reputation and impact revenue.

• Preventing abuse: Requiring consent helps prevent the abuse of personal data for purposes that the individual has not agreed to, such as unauthorised marketing, profiling, or discriminatory practices.

• Fairness: Consent mechanisms help keep data collection and processing practices fair and transparent.

• Data quality: Obtaining consent often means that the data collected is more accurate and relevant. Users who provide data willingly are more likely to provide information that is accurate and up-to-date.

• Responsible innovation: Using consent as a foundation, companies can innovate responsibly by developing new technologies and practices that respect user privacy and promote trust.

• Competitive advantage: Organisations that handle consumer data ethically and transparently can differentiate themselves in the market. Consumers are increasingly choosing products and services based not only on features and price but also on the way companies handle their data.

How consumer-permissioned data benefits businesses

Here’s how embracing consumer-permissioned data can transform your operations and deepen your relationship with customers.

• Better data: When customers share their data willingly, the quality of that data improves. Accurate, up-to-date information leads to smarter decisions and strategies.

• Customer trust: When you handle data with care, you earn customer trust. That trust translates into a loyal customer base and better customer retention.

• Personalised offerings: Customer-permissioned data allows you to personalise the customer experience.

• Legal compliance: Data protection laws and regulations have strict expectations around customer consent. Failure to adhere to these requirements can result in fines and legal action.

• Resource allocation: With high-quality customer-permissioned data, your business can better understand what’s working and allocate resources more effectively in response.

• Competitive advantage: A commitment to ethical data use sets apart your business from the competition. Consumers value data practices that demonstrate integrity and strong ethics.

• Innovation: Good data fuels innovation by providing more information about your customers’ interests and needs.

How businesses can implement consumer-permissioned data

By applying consumer-permissioned data, businesses can create a more responsive and customer-centric business model. Here’s how businesses can put consumer-permissioned data into action.

Developing personalised marketing campaigns

Companies can use permissioned data to craft personalised marketing campaigns that feel relevant and timely to the customer, increasing engagement and conversion rates. This might involve sending tailored email promotions based on past purchasing behaviour or displaying targeted ads that reflect the browsing history or previously expressed interests of users.

Improving customer service

With access to a customer’s purchase history, preferences, and previous interactions, service representatives can provide more informed support and resolve issues more effectively. For instance, if a customer calls about a problem with a product, the representative can quickly access the customer’s history and provide solutions based on that specific context.

Guide product development

By analysing data on how customers use products or services or by collecting feedback directly through data-sharing agreements, businesses can identify trends, preferences, and pain points. This insight allows companies to innovate or improve products and services to better meet the needs of their market.

Optimise operations

Businesses can use consumer data to improve their operations. For example, retail companies can analyse customer purchase data to manage inventory more efficiently, keeping popular products well-stocked and avoiding over-ordering less popular items. Similarly, identifying peak times and customer flows can help with staffing and resource allocation.

Segmenting and targeting customers

Businesses can use customer data to segment customers based on specific criteria such as demographic details, behaviour patterns, or purchase history. These segments help target specific groups more effectively with customised products or marketing efforts.

Manage risk

Companies can use permissioned data to assess and manage risk. Financial institutions, for example, use detailed financial data to assess credit risk and make lending decisions. Similarly, insurance companies use personal data to tailor policies and set premiums based on customers’ individual risk profiles.

Build loyalty programmes

Businesses can use customer data on purchasing behaviour and preferences to better grasp what motivates their customers and use those insights to design meaningful loyalty programmes.

Create feedback loops

Businesses can use consumer data to create feedback loops, regularly soliciting and analysing feedback on different aspects of the business and using this feedback to improve services over time.

Use predictive analytics

Businesses can apply predictive analytics to customer data to gain insights into future behaviours and trends. This can range from forecasting future buying behaviours to predicting market trends or even anticipating churn. Predictive models help businesses make proactive adjustments to their strategies.

Challenges and solutions in managing consumer-permissioned data

Managing consumer-permissioned data presents challenges for businesses. From navigating new legal regulations to future-proofing your data management practices, here are common challenges and solutions to keep in mind.

Navigating laws and regulations

Laws and regulations surrounding data privacy are constantly evolving, creating a dynamic and sometimes unclear legal landscape. This can complicate compliance efforts, especially for businesses that operate in multiple jurisdictions.

Stay on top of legal changes and engage in proactive policy shaping. Participating in industry discussions and policy development can help influence regulations in ways that are realistic and beneficial. Establishing a dedicated regulatory affairs role within the organisation can help your business anticipate and react to changes.

Maintaining data integrity

It’s important to maintain the accuracy and timeliness of data in real time, especially as businesses increasingly rely on instant data-driven decision-making. Facilitate this by implementing advanced technologies such as machine learning algorithms to cleanse and update data. These systems can identify inconsistencies or outdated information almost instantaneously, allowing for real-time data corrections and automated updates.

Combating cyber threats

As cyber threats evolve, sophisticated attacks such as ransomware or AI-powered phishing pose new risks—and traditional security measures might not be enough. Combat this by adopting a layered security approach that includes behavioural analytics and AI to detect unusual patterns that might indicate a breach. Engage in regular “red team” exercises where internal teams or third parties attempt to penetrate your security to help identify vulnerabilities before malicious actors can exploit them.

Minimising data

Collecting vast amounts of data can escalate storage and management costs – and risk. Combat this by embracing data minimisation principles with techniques such as edge computing, in which data processing occurs at or near the source of data generation. This reduces the need to transfer and centrally store unnecessary data, minimising latency and costs while increasing privacy.

Building consumer trust

With increasing awareness of data breaches and misuse, consumer scepticism is at an all-time high. Develop a transparent mechanism for customers to see exactly how their data is used in real time. For example, you could provide a customer portal that provides an audit trail of data access and usage.

Future-proofing data management

Fast-moving technological advancements mean that current data practices could quickly become obsolete. Invest in scalable cloud infrastructures and flexible data management systems that can easily adapt to new technologies. Prioritise interoperability and modular architecture in your tech stack to help you integrate with future technology.

Best practices in managing consumer data

In order to work with consumer-permissioned data effectively, businesses need to create a culture that values and protects customer data. By operating ethically, legally, and respectfully, you can ensure compliance with global data protection regulations, build a foundation of customer loyalty and trust, and differentiate your business in a competitive marketplace.

Here are some best practices for how businesses can collect and use consumer-permissioned data responsibly.

Communicate your policies and plans

Start with clear, straightforward communication. When asking customers for data, explain why you need it, how you will use it, and who will have access to it. Make sure your privacy policy is a clear, accessible document.

Provide easy opt-in and opt-out options

Provide an easy-to-use opt-in mechanism and an opt-out mechanism that’s just as accessible. This shows respect for customer autonomy and reinforces trust, because customers know they can change their minds at any time.

Regularly update and inform customers

Keep your customers in the loop. Regular updates about changes in data usage policies or how their data is contributing to improving services can make customers feel valued and involved. This ongoing dialogue can strengthen relationships and build trust.

Limit data sharing

Restrict access to customer data within your organisation and ensure any third parties that need access are held to the same high standards of data protection. Customers appreciate when you treat their data with care.

Implement strong security measures

Invest in strong security protocols to protect the data you collect. This includes encryption, secure servers, and regular security audits. Security practices protect data and your customer relationships.

Use data ethically

Adhere to legal standards and use data fairly, responsibly, and respectfully. Ethical data use should be at the core of your business strategy.

Educate your team

Make sure everyone in your organisation understands the importance of data privacy and how to correctly handle consumer data. Regular training sessions help instill a culture of privacy and responsibility across your company.

Monitor and audit data practices

Regularly review and audit your data handling and consent practices. This helps catch any potential issues early and demonstrates to customers and regulators that you are proactive about data protection.

Use technology

Use technology solutions that help manage consent and data preferences. From customer relationship management (CRM) systems to advanced consent management platforms, technology can simplify data-related tasks such as data handling and documenting consent.

Personalise with purpose

When you use data to personalise customer experiences, be intentional. Show your customers that their data lets you provide them with better, more tailored services, improving their satisfaction and your business value.