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Gemalto Global Survey Reveals Impact of Data Breaches on Customer Loyalty

By Peter Bernstein December 14, 2015

All around the world, brands have tried to quantify the threat of a publicized data breach. As a result, C-level executives have had to decide how much they are willing to invest to increase security. 

However, the big risk really is in the impact on the brand, and specifically on customer loyalty.  And if the latest consumer survey, Broken Trust: 'Tis the Season to Be Wary, from digital security solutions provider Gemalto is any indication, this really can be characterized this as a case of SELLERS BEWARE!  

Gemalto commissioned market research specialist Vanson Bourne to undertake the research on which this report is based. 5,750 consumers were interviewed during October and November 2015. 1,500 interviews in the U.S., 500 in Brazil and 750 in each of the following countries: UK, Australia, Japan, France and Germany. To qualify for the study, consumers had to actively use online/mobile banking, social media accounts or online retail accounts.??  Let’s just say the findings are illuminating.

In fact, at a macro level:

  • 64 percent of respondents say they are unlikely to shop or do business again with a company that had experienced a breach where financial information was stole?n
  • 49 percent had the same opinion when it came to data breaches where personal information was stolen.

Views you can use

Below are a few of the key findings from the report that should be useful to those trying to make the case to upper management that being proactive is better than reactive regarding protecting digital assets.   

First, with the holidays upon us, the survey found that 59 percent of respondents believe that threats to their personal information increases during the festive season, and a rather shocking 18 percent believe that they are likely to be a victim of a breach during the holiday season this year. 

Things get dicey when we look at consumers’ confidence in corporations to protect digital assets.  Only 25 percent of all respondents feel that companies take the protection and security of customer data very seriously.  In addition, 69 percent feel that the responsibility of protecting and securing customer data falls on the company, and of the employed respondents, only 38 percent feel that their employer takes the protection and security of employee data very seriously. 

None of this is really that new.  In fact, 31 percent of respondents have already been affected by data breach in the past. Around four in ten state the most likely causes for being a victim of a breach are: visiting a fraudulent website (42 percent); phishing attacks (40 percent) or clicking a fraudulent web link (37 percent). The emotional impact of data breaches has also created apprehensive feelings toward businesses, with 19 percent indicating they are likely to be a victim of one within twelve months to three years. 

But wait, there’s more!

Just in case these findings were not scary enough for sellers, 90 percent of surveyed consumers said they believe apps and websites pose significant risks to the protection and security of their personal information. In addition, 55 percent said social media sites expose them to the greatest risk, and around two in five respondents believe adult content and torrent apps/websites carry the greatest risk to the security of personal information. 

There is also a lot of anger out there.  Nobody is interested in setting themselves up for being twice burned and are looking for compensation for their bad fortune.  23 percent of respondents who have been a victim of a data breach, either have, or would, consider taking legal action against the breached company involved in exposing their personal information. And 49 percent said they would take or would consider taking legal action against any of the parties involved in exposing their personal information. 

The only encouraging news from the survey is the recognition that security must be a two-way street.  Unfortunately, this is reflected in the findings that:

  • 54 percent of respondents are using the same password for all or some of their online accounts.
  • Of the respondents who actively use social media accounts, only a quarter (25 percent) use two-factor authentication to secure all of their social media accounts.
  • Of the respondents who actively use online/mobile banking, 58 percent say that all of their banks use two-factor authentication to secure their internet banking.
  • Of the respondents who actively use online retail accounts, 25 percent say all of the online retail apps/websites they use, require two-factor authentication to secure online transactions. 

Commenting on the report Jason Hart, Vice President and Chief Technology Officer for Data Protection at Gemalto stated:  "The media coverage of massive data breaches has done little to instill consumers' confidence in how well companies, big and small, are protecting their data…The fact that employees don't even feel that their employers are taking the protection of their personal data security very seriously rings alarm bells. Either companies need to increase their security measures or, assuming that they already have these in place, they need to communicate this to their customers." 

He added, "As companies collect ever-increasing amounts of customer data and as our digital interactions become more diverse, more data about what we do, who we are and what we like is being stored online…The survey proves that the traditional data security mind-set needs to evolve, this goes for companies and consumer adoption of advanced security measures like two-factor authentication. Otherwise, an increasing numbers of consumers will cut ties with companies who aren't taking data protection seriously, and take their business to someone they can trust." 

For those interested, Gemalto has created a useful infographic that summarizes the report findings. 

While no company is immune from being attacked by those with malicious intent, the perception that a company has not taken “good care” can have serious consequences.  Consumers are rightfully skeptical of companies that have been breached, and as the survey shows, they are very mad and willing to express it not just in posting bad comments on social media, but through litigation.

Yes, we as consumers bear some responsibility for holding up our end of the cybersecurity bargain. As noted, the Gemalto survey should serve as more than a gentle nudge to C-levels that they need to foster confidence in their customers.   

Finally, and not noted in the study, is that companies that handle data breaches swiftly and with a great deal of transparency and some form of customer loyalty rewards can greatly mitigate the harm to their reputations and revenues.  That said, promoting the readiness to deal with bad things should they occur might not be a bad thing to do given how customers already feel.  

Edited by Kyle Piscioniere
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