Privacy and the Internet of Things

Internet-connected appliances, wristbands, and many other items are part of the "Internet of Things" that, by one estimate, will encompass 50 billion gadgets by 2020.

What does it mean when those gadgets are collecting data on the personal life, behavior, and habits of consumers (fitness patterns, usage of appliances, etc.)? Behavioral targeting is on the rise and marketers want to be able to reach consumers at appropriate times and places and occasions. Data from gadgets can be of great value in such targeting.

One issue is whether users are even informed about what data is being collected and how it will be used. Privacy policies posted on web sites won't help if you're not able to read them before you connect the thing (new air-conditioner, new fitness band) to the Internet. Your choice will be made even before you know you've made a choice.

A second issue is how safe your personal data will be. More than half of the respondents to a recent survey indicated they were extremely concerned or somewhat concerned about privacy issues such as a breach in security.

A third issue is personal identifiability. Will collectors of data from your gadgets be able to distinguish you and your habits from others? Do you or should you have the right to say whether this data is collected and how it is used, by whom, and for how long?

Will Digital Wallets Catch On?

Visa recently announced the fall introduction of a new digital wallet service for one-click buying. Customers with a Visa card simply use a password and click to complete an online or mobile purchase on any Web site, adding convenience and speed to the transaction. Visa is also looking at a near-field communication payment system, in the mode of "wave your phone near the payment point" and enter a PIN to complete the transaction (above).

The digital wallet isn't a new concept. Google has been experimenting with a near-field communication payment system. Isis (owned by big telecommunications firms, among others) plans to test a near-field communication system in Salt Lake City next year. Intuit is working on a mobile payment system of its own.

Will any of these catch on with consumers? To become popular, any digital wallet will have to provide much more convenience and speed than existing payment methods. It will also have to be highly secure, a very important point for customers wary of problems such as the theft of debit/credit card information from compromised PIN pads in Michaels craft stores.