Digital trust is the currency of today and will be central to defining the winners of tomorrow.
Advances in information and communications technology combined with exponential growth in data, have given rise to a more empowered consumer. Today, the majority of digital businesses rely on an ad-centric, data driven business model. However, they have missed and often intentionally neglected the opportunity to establish a trust-based relationship with their customers. Users are forced to blindly trust in fair and lawful conduct. The steady erosion of privacy results in pervasive concerns regarding the use of personal data.
Although today’s internet users are very much concerned about privacy and the integrity of their business partners, two third of consumers globally are willing to share additional personal data in exchange for additional services or discounts.
Digital leaders like Facebook and Uber are struggling to comply with upcoming requirements for transparency and accountability. In order to still be able to harness the evident value of data, companies must follow a new paradigm. They need to understand and manage trust.
The digital economy and its data-driven business models are on a journey towards trust-based customer relationships. The most critical and fragile enabler for this transformation is online trust.
Trust is the result of a deliberate calculation process. Customers screen signals from online vendors and decide whether to take the risk to get vulnerable to the actions of another party or not. Generally, these trust cues are visible and actionable.
However, the formation of trust is also largely driven by cognitive structures that are not directly actionable. In our metaphor, these trust constructs lie below the waterline.
The iceberg trust model draws on recent findings from socio- and neuroeconomic research. Researchers have come a long way in analyzing online trust. We combine these findings into a framework that not only allows understanding how online users actually trust but rather identifying where businesses can take influence.
Trust plays a central role in helping consumers overcome perceptions of risk and insecurity (McKnight, 2002)
Research in behavioral economics indicates clearly that humans don’t always act rationally as implied by traditional economics. Digital transformation makes this fact even more transparent. Our brain is just not made to cope with the speed technologies are about to disrupt markets, politics and society. Our decision-making is prone to biases. And that’s ok. These imperfections are part of a very effective design – A design of the brain that eventually allowed humans to thrive in evolution.
Businesses can support the customer’s decision-making process by benevolently intervening. With knowledge of effective trust cues, such behavioural interventions can help customers making the “trust leap”.
We differentiate two types of interventions that can successfully shape the customer’s choice architecture; nudges and rational overrides.
Nudges propose positive reinforcement and indirect suggestions as ways to influence the behavior and decision making of groups or individuals.
A rational override is a small moment of intentional friction that attempts to influence people’s behaviour or decision-making by intervening automatic thinking and activating reflective conscious thinking.
The “balancing act” of competing business interests and privacy requirements will be of increasing importance in the near future. Marketing often takes advantage of the consumer’s bounded rationality and their well known cognitive biases. Such a rather opportunistic approach in digital markets is not sustainable.
Electronic markets have the potential to substantially reduce information asymmetry and transaction costs. They offer effective opportunities to gain insights into needs and behaviours of customers. Extracting these insight requires respectful and farsighted handling of personal data. The digital revolution with its explosive growth of data and system complexity is about to transform industries again. In order to harness the potential of data, the digital economy and its data driven business models must get on a journey towards trust-based customer relationships.
It all starts with a better understanding of digital trust.
