The retail industry is experiencing a profound technological revolution, with artificial intelligence (AI) and machine learning transforming the landscape. These new technologies bring immense benefits to expedite operations and enhance security, but they also raise concerns about customer privacy.
As AI expands into new industries, including retail analytics, regulators are increasingly focusing on data privacy issues. The European Union, for instance, has taken significant steps with the AI Act, categorizing AI systems according to the risks they pose and appropriately regulating them. Based on a report by Gartner, by 2024, 40% of privacy compliance technology will rely on AI, up from 5% in 2019, and by 2025, 60% of large organizations will use at least one privacy-enhancing computation technique in analytics, business intelligence, or cloud computing.
AI is revolutionizing how retailers approach security. By moving from reactive measures to proactive ones, businesses can better anticipate and manage risks. However, this transformation also draws greater attention to user privacy and data handling. While AI offers numerous benefits for retail security, it pose critical challenges concerning user privacy.
Some of the benefits are:
Some of the risks are:
According to a survey by Taylor Wessing, 69% of consumers said they are concerned about how their personal data is used by companies, and 58% said they are more likely to trust companies that are transparent about their data practices. Therefore, retailers need to consider and balance the benefits and risks of AI for retail security and privacy and adopt a consumer-centric approach to data collection and use.
Costco: In October 2023, the wholesale retailer notified its customers that it experienced a data breach that exposed the personal information of some online shoppers, including names, email addresses, shipping addresses, order details, and Costco membership numbers. The breach occurred due to a third-party vendor that provided chat services on the company’s website.
American Airlines: In June 2023, the airline company reported that it suffered a data breach that exposed the personal information of thousands of pilots who applied for jobs at American Airlines and Southwest Airlines. The breach occurred due to a hacker who accessed a database maintained by a recruiting company that worked with both airlines.
UPS Canada: In July 2023, the delivery company confirmed that it experienced a data breach that exposed the personal information of some customers in Canada, including names, phone numbers, and addresses. The breach occurred due to a misuse of a package tracking tool on the company’s website.
Cybercriminals can exploit customer data from retailers and brands for illicit gains on the dark web or identity and fraud schemes. Retailers and brands must adopt robust security practices to safeguard their customer data and adhere to global rules such as GDPR and CCPA.
Finding the right balance between increased security and customer privacy requires both technical and non-technical solutions. Here are some best practices that can help retailers achieve this balance:
AI and data privacy are inextricably linked in retail, offering both opportunities and challenges. While AI enhances security, operations, and customer experience, it also raises ethical, legal, and technical concerns. Striking the right balance and adopting a consumer-centric approach is crucial. By following the best practices, retailers can leverage AI for security while safeguarding privacy.
Still, data breaches remain a serious threat, as recent incidents at Costco and American Airlines demonstrated. Protecting customer data and complying with regulations is imperative. What are your thoughts on AI and data privacy in retail? How comfortable are you sharing data with retailers? How do you believe retailers can prevent and address data breaches? Let us know!