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People v technology - Who’s in control?

Global Digital Risk Survey 2022: Chapter 1

The business world has embraced digital transformation at scale and at pace over the last five years. Digitisation is now pervasive rather than niche, mainstream rather than an outlier.

“Digital, the word, will disappear. It's ubiquitous.”

 - Tom Bigham, Digital Risk Partner

What’s next? The distinction between digital operations and business-as-usual will disappear, as with the term ‘e-commerce’ in the wake of the era.

Mirroring the early days of the commercial internet, digital technologies will cease to provide the competitive edge in themselves, but, they will emerge as the arenas in which companies will compete.

Without confidence it is very difficult to conduct business or engage with consumers. Digital ethics, the responsible use of data and digital technology by organisations, is paramount in earning that confidence whether that is in terms of privacy, data-sharing, responsiveness, transparency, fairness, sustainability, or the other values prioritised by consumers.

Given the premium put on trust in customer relationships, business leaders should be concerned by our research revelation that half (50%) of consumers think that businesses follow digitally ethical practices and just 37% feel that they are adequately informed by those organisations about how that digital technology is being used.

This confidence deficit contrasts sharply with the views of business leaders; more than three-quarters (78%) of whom are confident that their organisations follow digitally ethical practices. In fact, more than a third are highly confident (36%) compared to just one in seven (15%) consumers.

This polarisation of perceptions indicates that organisations have a dilemma balancing digital strategies they are pursuing with what consumers are comfortable with.

“We often talk about the head v heart dilemma of digital risk. The head; digital innovation is driven by demand for business growth, competition and commerciality. The heart; this is far less objective – driven more by consumers perception of and preferences for digital innovation..”

 - Charlie Gribben, Digital Risk Partner

But the devil is in the detail, so drilling down into the survey results – across 26 use cases of digital technology – produces some striking insights. Interestingly, issues of control predominate, as consumers are discovering that the face to face human interactions they are used to are being replaced by sometimes invisible algorithms.

How confident are consumers in the use of digital technologies?

People are happiest using technology when they feel that they are ultimately in control of it. The more that the human actor has the authority to override or cancel a digital process, whilst having the option to interact with another human, the more confident they are. Quite simply, we need to find that equilibrium between full digitisation and human control. This confidence can be greatly enhanced by ensuring that three behavioural traits are respected.

1. Providing immediate assurance that an activity has happened as desired and transparency of the repercussions: Anyone who has used a digital technology is all too familiar with that queasiness that comes from not knowing whether a process or transaction has been successfully completed. When wi-fi connection is lost just as the app is processing a payment, consumers want to get immediate assurance that the activity happened as desired. Transparency is paramount as is the hybrid of technical excellence and the resilience provided by human back-up.

“What sources of proof or safety exist?.”

 - Tom Bigham, Digital Risk Partner

2. Enabling humans to retain the power to make the ultimate decision: Comfort with reliance on digital technologies has increased enormously in recent years, witness the widespread popularity of voice-controlled virtual assistants. Artificial Intelligence (AI) is transforming data-heavy industries such as finance, retail and healthcare – in beneficial and positive ways.

3. Adapt consumer experiences depending on the perceived risk involved: Trust and confidence are greatly enhanced when the nexus of human, machine, risk and confidence are in harmonious balance. The survey results point to a sweet-spot in digitisation that exploits the machine capabilities in making recommendations and process efficiency while leaving the human actors with control and transparency over the final decision and outcome.

This is clearly seen in the fact that nearly half (46%) of consumers are confident about allowing digital technologies to monitor vehicle safety whereas this falls to just over a third (35%) who are confident in letting AI ultimately control an autonomous vehicle. The same psychology pertains in financial decision-making.

While 57% would be confident in letting a bot analyse their personal data to make investment recommendations, this falls to just 40% of consumers who would be confident in letting the same technologies manage their portfolios.

Considering the degree of impact if something goes wrong, asking ourselves ‘what’s the worst that could happen?’ is a key heuristic for humans. In the digital context, people tend to be much less confident in those technologies that could potentially have a high impact on their lives.

That can be seen in the relatively high levels of confidence in allowing automation of low impact, routine tasks such as making online payments (66%), shopping for low value items (62%) and controlling home heating and lighting (60%).

The flipside of this confidence is the relative aversion to ceding control to digital applications when the stakes are much higher in terms of potential negative consequences if an error is made. Hence, just 38% of consumers are confident of letting AI make medical diagnoses or recommend treatment while less than 32% would be confident in letting an AI application decide on judicial sentencing.

Such issues of trust in the emerging digital eco system are not intractable. More than half of consumers (55%) would feel more confident in using digital technologies if a regulator had more authority and oversight. The confidence with which organisations are addressing these regulatory and legal requirements varies significantly across industry. Banking (80%), manufacturing (70%) and education (70%) among the most mature compared with oil & gas (47%), energy (44%) and life sciences (38%) among the lowest.

“GDPR shone a light on how much we inherently trust organisations. But even some of the most advanced struggled to deal with the implications. Regulation should focus on enabling organisations, and helping the demonstrate positive outcomes.”

 - Charlie Gribben, Digital Risk Lead Partner

Consumer-led design: Embedding regulatory objectives in digital journeys; Suchitra Nair, Partner EMEA Centre for Regulatory Strategy

There are two fundamental ways that consumer confidence in digital can be built by applying regulatory objectives. Organisations have the opportunity to differentiate and this is actionable now.

1. Most organisations apply regulations as an after-thought, and layer it over the the design of the digital customer journey. This can lead to the customer not fully understanding the risks, protections available, or costs inherent in that service. This will inevitably lead to a confidence gap if any of those risks manifest or perceived protections are not made available. Lessons can be learnt from successful digitally native fintechs who have adopted a regulation-first approach, integrating it fully in the customer journey, and prioritising transparency and clarity of terms and protections and building in optionality for the consumer to actively choose the risk/ cost trade-offs through the digital journey.

For example, during a digital car insurance application process, at an early stage in the journey a customer can choose to add breakdown cover at an extra £20. The risk/cost trade off is clear up front and optionality is available, putting the customer in control and being clear about the level of protection available.    

The design challenge of course is striking the balance between clarity, optionality and delivering a seamless customer experience.

2. As digitisation becomes more pervasive in the market, expectations around value, suitability, access and transparency have increased from both customers and regulators. Additionally, particularly in financial services - but increasingly in other sectors - firms are being held accountable for treating customers fairly. Catering to a diverse set of customers - including those that are vulnerable - and ethical use of data are increasing in importance. While regulation sets the expectations of how these critical areas should be addressed, firms who embrace these concepts into the DNA of their strategy will successfully differentiate themselves in the market and bridge the consumer confidence gap.

Consumer-led design: The Future of Internet Regulation: Compliance as a Competitive Advantage; Nick Seeber, Internet Regulation Lead Partner

“As the world has become connected, the same challenges we see in the real world — harmful and antisocial behaviour, misinformation and crime — are now unconstrained by national borders, able to spread instantly and impact many more people.

How do organisations retain and build consumer confidence as digital use increases and new challenges continue to evolve? How do regulators and internet companies ensure consumers feel in control and not more exposed?

Naturally, policymakers are looking to ensure the Internet is a safe and open space for everyone. Comprehensive regulation of the online business environment has the potential to provide control and transparency to consumers and strengthen not only internet company brands but also how all organisations use the Internet. Providing internet companies with “rules of the road” gives these organisations standards and guidelines to adhere to, instead of having to self-regulate and be held accountable to undefined standards by governments. It also empowers consumers to take control of their online presence and the way they interact with organisations’ content on these platforms.

However, this regulatory wave requires Internet Companies to transform the way they operate and engage in the complex interplay of trust, safety and open competition. They must elevate and integrate risk and compliance to their core agenda.”

Deloitte’s “The Future of Internet Regulation: Compliance as a Competitive Advantage” whitepaper explores these challenges and outlines our six critical actions that can shift regulatory response from a posture of defence to advantage.

The fundamental shifts in the way that risk manifests in a digital organisation will certainly require new risk, compliance and control frameworks. An agile approach that allows monitoring of risks in real-time, rather than introducing more friction, would ultimately benefit all parties.

But there is a balance to be achieved between introducing more regulation, ensuring better compliance with existing regulations, and simply improving transparency and communication around digital risk generally.

Tellingly, only 40% of consumers currently feel adequately informed by organisations about their digital policies, suggesting that more openness and consumer engagement would be a beneficial quick win in addressing the trust gap.

How to bridge the confidence gap?

As companies continue to digitise, building confidence also means ensuring control over technology both internally and externally. Control in the instance doesn’t just refer to the guardrails put in place by an organisation to manage risk, it requires cooperation between many different players and relies on pre-emptive communication between them. Consider:

  • What can you learn from theexperiences of other sectors and organisations?
  • How can you make sure that you have identified the right risks to manage?
  • When developing automated services and solutions, have you stress-tested the confidence that consumers would have in them and your organisation? Before undertaking any new digital innovation – have you thoroughly mapped the impact to customer experience, and engaged customers to stress test the confidence in them and your organisation?
  • How are you communicating with consumer to give them the confidence that they are in control by embedding transparency, choice and fairness in everything you do?
  • Are you prepared for the upcoming set of regulatory interventions across the digital landscape? Who in your organisation is responsible for responding to the same across the end-to-end customer journey?

Digital brings new unknown unknowns, creating new risks for organisations. Being able to identify, assess and remediate these risks can give stakeholders the confidence that digital risks will not turn into digital issues.

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