What is your byte worth?

Estimated reading time: 15 minutes.

Dawn of a new era: Data is the oil of THE digital economy

We are surrounded by all kinds of smart devices, from smart televisions, smartwatches, to even smart refrigerators. Every dumb device is being made smart, venting out bytes, and bytes of structured and unstructured data.

With the advent of next-gen technologies such as Artificial Intelligence, Internet of Things, and Open Banking tech, there is no doubt that data has become the new Oil of the digital economy. Some may wonder whether it is more powerful than oil ever was because it is not owned by a consortium of countries. However, if you look deep, things are not as they appear!

We are witnessing the monopoly of so-called GAFAM* (Google, Amazon, Facebook, Apple, and Microsoft), which are using our data to build billion-dollar products and services. This makes us wonder, why is our data so lucrative for these tech giants?

*Also include Netflix to the list as well as Asian tech giants such as Alibaba and Tencent (which are also giving stiff competition to American tech giants in third world countries such as India, Brazil, and Africa).

New economy

First of all, we are generating large volume of data per second, as per IDC, a market-research firm. It predicts that the collective sum of the world’s data will grow to 175 zettabytes (175 followed by 21 zeros) by 2025 v/s 33 zettabytes in 2018, growing at a compounded annual growth rate of 61 %. IDC also predicts that by 2025, 6 billion people will interact with data every day (i.e. 75% of the world’s population). Many of these interactions are because of billions of smart devices (or Internet of Things) connected across the globe.

Data is powering a new economy, which is not restricted to only storing rows or columns of personal data. The new economy is more about analyzing and making predictions from often unstructured data, and to either generate new revenue streams or cultivate the existing.

Reduction of storage and computing costs led to the rise in Machine learning** (ML), and Artificial intelligence (AI). These technologies are giving way to new business models, and new data monetization revenue streams for tech as well as non-tech companies.

**In layman’s terms, AI lets machines perform multiple as well as complex tasks in a smart method, related to human minds. Machine learning helps computers to scrutinize and solve problems by teaching basic logic and allowing the machine intellectual enough to learn on its own, as it progresses to solve different variations of the problem.

Some of the popular use cases are Google Search Engine, Chatbots (e.g. Siri, Alexa, Google Assistant), Fraud Detection (by Banks/Financial Institutions), and Marketing Personalization (by Google AdSense, Facebook Ads).

The value of data

The data that you generate while making any payment, or while searching on Google, or sharing on WhatsApp, Snapchat, or FB, tweeting, or retweeting are all being stacked up and analyzed. For what? To provide more products/services to you so that you can spend more, like more, search more, and share/tweet/retweet more…

To keep things simple, let me give you some examples of the companies you already know!

It is estimated that around 3 % of the world’s computer storage capacity is used to store the data of Google’s billions of users. Your data doesn’t sit idle in huge Google’s datacentres. It is continuously circulated, transferred, and shared with a lot of stakeholders in the data monetization value chain.

When you search for anything on Google, from financial information to even wedding planners near your location, you normally get a long list of highly relevant search results. Along with these results, you may also find related suggested pages from Google Ads advertiser.

As per Investopedia, “Advertisers pay Google each time a visitor clicks on an advertisement. A click may be worth anywhere from a few cents to over $50 for highly competitive search terms, including insurance, loans, and other financial services.”

In 2019, Google’s ad revenue amounted to 134.81 billion US dollars (83% of Google’s total revenue) v/s US$ 69,655 for Facebook (98.5% of total FB’s revenue).

Google’s data and analytics platform products have been the largest drivers of growth in Google’s revenue over the years.

To know in detail about how your data is a commodity for tech giants, and how they are making a fortune out of it – Please visit – “Digital Advertisement Revenues – Your Data is too Important”.

Enough of high-level talk. Let’s dig deeper!!!

Citing the example of Google was important to make the reader understand that your data is a commodity for tech giants.

You must be thinking, did I miss Facebook…Ohh not at all. Now I would like to remove one doubt, which most people have – “Has Facebook more of my personal data or Google?”

If you think Facebook knows a lot about you, then you may be wrong!

An investigation by Daily Mail (UK) in 2018 revealed that Google is spying on millions of its users and keeping detailed records of web browsing stretching back nearly 10 years! Over a year, Google would gather the equivalent of almost 570,000 pages of A4 paper of data of an individual. Google amasses billions of pieces of information from people using the products and services it owns, including its search engine, google maps, voice assistant, email, and YouTube.

“Sinister surveillance” techniques, as the report calls them, would allow Google to collect data even from browsing sessions made in incognito mode.

ANOTHER SET OF PLAYERS OR DATA OWNERS

As per McKinsey experts in the fields of digital transformations and Artificial Intelligence, “Any large business or bank has two types of customer data: line-of-business (LOB) data owned by a particular part of the business, and common data, which falls into two groups: enterprise-level data and supplemental data.”

Please do not forget that here customer refers to you!

Enterprise-level data consists of the same elements as LOB data—customer preferences, needs assessments, and so on—but spans the organization, and in most evolved enterprises is drawn from a single source, such as a data lake.

Supplemental data ranges from raw data derived from external sources such as social media, weather data, and digital IDs to synthesized, value-added analytics. This type of data is captured through predictive modeling, sentiment analysis, and so on.

Several digital companies and start-ups are creating value by combining internal and external data, or by helping others to do so.

In the data monetization value chain, many players are involved. As per the chart below, it can be seen that payment providers have particularly good access to the overall data, as it has access to not only the consumer but also the merchant data.

Source: Mckinsey&Company

Your data is not in your hands!

Taking an example of a simple digital transaction like swiping a card, let me show you how your data is likely to go to various types of businesses that could mine and share elements of your purchase.

Banks and Card Issuers:

For example, when signing the undertaking while getting a credit card (for example), you must have already provided consent to the credit card issuer to use your data. For example, Citibank explicitly mentions:

“The Customer hereby authorizes Citibank to exchange, share, part with all information related to the details and transaction history including Customer’s personal information to banks/financial institutions/credit bureaus/agencies/participation in any telecommunication or electronic clearing”

The card network

The e-payments industry is dominated by four companies. Visa, MasterCard, American Express, and Discover are responsible for handling the majority of card payments globally. In some Asian countries, there might be some other players also, for example, India’s RuPay and China’s Union Pay.

Probably you end up having one of these cards.

These networks, whose main business is to connect with the banks internationally, have revenue streams being generated from aggregating purchases and selling them as “data insights”.

As per Bloomberg, Google and MasterCard cut a secret Ad deal to track retail sales in the US. Google paid MasterCard millions of dollars for MasterCard customer’s transaction data. Eventually, Google used this data to help select Google advertisers to track whether the ads they ran online led to a sale at a physical store in the U.S. However, most of the billion MasterCard holders aren’t aware of this behind-the-scenes tracking.

Stores

The store from where you are buying things most probably uses your card data to help build a “Guest Profile” about you. This is effective for them as they can learn about your purchasing habits, your likes/dislikes. The tech, which helps these stores track you, often comes from payment platform providers, card-swipe machines, and the merchant banks that process transactions for them. The firms gain access to your name, card number, and other details. The data is most probably being shared not only with the merchant bank but also with card machine manufacturers, for example, Verifone or Ingenico.

Moreover, whenever you are providing them additional details for example, by filling up their feedback form, you are eventually helping them to enhance your guest profile!

Mobile wallets

When you are paying using mobile wallets, a lot of additional details go to the stakeholders.

Google Pay does mention on its website that “We do not sell your personal information to anyone. When you pay with Google Pay, your personal information won’t be sold to third parties.”

However, this is deceiving:

When you will check the Google Privacy & Terms, it mentions that the data may be shared outside of Google – such as “trusted businesses or persons”. Moreover, as per Google Payments Privacy Notice, in addition to the information listed in the Google Privacy Policy, Google may also collect other kinds of information while you are using Google Pay for transactions. This could be “date, time and amount of the transaction, the merchant’s location and description, a description provided by the seller of the goods or services purchased, any photo that you choose to associate with the transaction, the names and email addresses of the seller and buyer (or sender and recipient), the type of payment method used, your description of the reason for the transaction and the offer associated with the transaction, if any.”

As per Google, your personal data may be shared in some circumstances:

“For example, when you make a purchase or transaction using Google Payments, we make certain personal information about you available to the company or individual that you purchase from or transact with. This includes sharing your personal information with the developer from whom you purchase when you use Google Payments to make a purchase on Google Play.”

“When you add a third-party payment method to your Google Payments Account, we may exchange certain personal information about you, such as your name, profile image, email, IP and billing address, phone number, device info, location and Google Account activity info, with the third-party payment provider as necessary to provide the service.”

The Samsung Pay app has details from your past 20 transactions. However, the company says that the information isn’t stored on its servers. The app also delivers location-based promotions.

Apple says “when you use Apple Pay with credit, debit, or prepaid cards, Apple doesn’t retain any transaction information that can be tied back to you—your transactions stay between you, the merchant or developer, and your bank or card issuer.”

We all have a responsibility towards the new economy

Photo by Anastasia Shuraeva on Pexels.com

To summarize, we all are producing a vast amount of personal data, and this is a commodity for many tech giants and start-ups. Yes, data protection and privacy policies are being worked upon by regulators, for example, GDPR (General Data Protection Regulation) by the European Union.

The GDPR means that 28 European countries now have strict laws and can impose heavy fines should a data breach happen. The US does not have any centralized, formal laws in place at the federal level to protect the electronic transmission and storage of individuals’ data to the extent of the GDPR. Still, some federal legislation does exist to protect data more generally.

However, the headlines in 2017 about Facebook and Equifax, where it exposed 150 million Americans’ personal data, or the famous Facebook-Cambridge  Analytica scandal in 2016, should be a warning to all the businesses: Data is not only the Oil of the digital economy, but it is also the new CSR (Corporate Social Responsibility).

Twitter’s security recently came under scrutiny when someone social engineered their way into the site’s admin panel (worst cybersecurity incident the company has ever faced), allowing the cyber intruders to access and post cryptocurrency scams from some of the site’s biggest verified accounts (such as Elon Musk, Barack Obama, Kanye West, Jeff Bezos, Kim Kardashian, and accounts of Uber and Apple).

The governments are also realizing the monopolistic stand of tech giants and are taking actions, such as the recent suing of Google by US Justice Department for violating antitrust laws.

Google is accused in the lawsuit of harming competition in internet search and search advertising in which it pays other companies millions of dollars to prioritize its search engine in their products. This is only a beginning, as filing is first step in a battle that could take years.

In some Asian countries, especially India, where digital economy is poised to reach a valuation of $1 trillion dollars by 2022/23, strong regulations are getting framed.

India is trying to follow the EU’s General Data Protection Regulation (GDPR) guidelines in allowing global digital companies to conduct business under certain conditions, instead of following the isolationist framework of Chinese regulation that prevents global players like Facebook and Google from operating within its borders.

For example, India did not let Facebook to fully launch WhatsApp pay services until and unless it moved its payments system data exclusively to India.

As data owners (yes we are the owner no matter where our data resides), we should continuously seek to improve our understanding of where and how our data is being used, and we all must use all kinds of precautions to safeguard our privacy.

As a starter, take initiative by using privacy controls provided by Google, Facebook, Twitter, or any other platform that you use frequently. Also, control and delete Cookies on your browsers to stop being monitored continuously!

Sources: IDC, Investopedia, Juniper Research, CNBC, Daily Mail, Mckinsey, Bloomberg, The Guardian, Wired, PCMag, Google’s/Facebook’s/Amazon’s SEC Filings, and Fiscal Results Documents, Citibank Digital Banking Terms and Conditions, Google Safety Center, Google Privacy & Terms, Google Payments Privacy Notice, Apple Pay Security and Privacy Overview, Eur-Lex (Access to European Union Law), The United States Justice Department, The Ministry of Electronics and Information Technology

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