Customer Data Protection: Strategies, Best Practices and Compliance

Do you know when a business becomes trustworthy in the eyes of its customers?

The most obvious answer here is when they meet their customers’ needs and expectations or even exceed them. 

But, there’s another important factor that impacts customer loyalty and trust. And that’s how effectively your business safeguards and protects customer data. 

Customers don’t just want to feel satisfied when doing business with you, they also want to feel secure. They have to know that all data they shar with you is safe. That’s what builds real long-term trust. 

But, how do you implement a strong customer data protection strategy? Let’s find out in this guide.

Table of Contents

• What is Customer Data Protection?
• Types of Customer Data That You Need To Protect
• Consequences of Customer Data Breach
  • 1. Financial loss
  • 2. Reputation damage and loss of customer trust
  • 3. Legal consequences
• 6 Strategies To Protect Customer Data
  • 1. Implement strong security measures
  • 2. Collect as little data as possible
  • 3. Train your employees with security best practices
  • 4. Invest in data protection tools
  • 5. Compliance with data protection regulations
  • 6. Have an action plan for data breaches
• Gain Your Customers’ Trust By Protecting Their Data
• Frequently Asked Questions (FAQs)

What is Customer Data Protection?

Customer data protection is the practice of safeguarding sensitive information that you, as a business, collect from your customers. It involves implementing a set of security measures to prevent unauthorized access, misuse, disclosure, alteration, or destruction of your customers’ personal data.

Protecting customer data should be deeply embedded in your company’s culture. As a business owner, you need to create a culture of privacy and security. You can do this by:

• Having zero tolerance towards data mismanagement. 
  
• Managing data responsibly by adhering to regulations such as GDPR or CCPA – whatever is applicable in your region. 
  
• Making data available only to those who have the right to see it (Eg, your leadership team)
  
• Constantly monitoring potential threats and proactively tackling them.

Types of Customer Data That You Need To Protect

Now, let’s talk about the types of customer data you need to protect. Although this may differ from one business to another, here are some of the data that has to be protected at all costs:

• Personal information: This includes names, addresses, email addresses, phone numbers, and other data that can be used to identify an individual.
  
• Payment details: Credit card numbers, expiration dates, CVV codes, and billing addresses are highly sensitive data that must be protected to prevent financial fraud.
  
• Sensitive personal data: Some data is even more delicate—like Social Security numbers, passport numbers, or medical information. This type of data requires the highest level of protection due to its potential for misuse in identity theft or fraud.
  
• Behavioral data: Information about customer preferences, browsing history, and purchase behavior can be used to personalize experiences but also needs to be protected to maintain privacy.
  
• Account information: This refers to usernames, passwords, and security questions that customers use to access their accounts. Protecting this data is crucial for preventing unauthorized access and maintaining the integrity of customer accounts.

Consequences of Customer Data Breach

In 2017, Equifax, a well known credit reporting agency, suffered a massive data breach. It exposed the personal information of 147 million people, including Social Security numbers, birth dates, and addresses.

The breach was caused by a vulnerability in their software that wasn’t patched in time.

What do you think would have been the consequences of this massive data breach?

Believe it or not, the company was fined $700 million for failing to protect sensitive data. This served as a major wake-up call for businesses everywhere about the importance of data security.

So, here’s a breakdown of the consequences of a data breach:

1. Financial loss

The financial impact that follows right after a data breach is huge. In fact,  as per the FBI, the cost to a business for an email compromise attack is roughly around $130,000.

You’d have to pay to investigate the breach, notify your customers, and pay for penalties associated with it. 

2. Reputation damage and loss of customer trust

This is by far the biggest long-term consequence of data breaches. It takes years to gain your customers’ trust, which can be shattered within seconds. 

This ultimately damages your business’s reputation, making acquiring customers even more difficult. Even vendors and clients won’t feel safe doing business with you. 

Recommended read: 7 Tips to Inspire Lifelong Customer Loyalty

3. Legal consequences

With data protection laws like GDPR in Europe and CCPA in California, businesses are legally required to protect customer data. Non-compliance can result in hefty fines and legal actions. 

For instance, under GDPR, fines can be as high as 4% of annual global turnover, which can be crippling for many businesses.

6 Strategies To Protect Customer Data

The first step to protecting your customer data is to understand how data breaches happen. Once you understand this, it will be relatively easy to apply different strategies to protect customer data.

How do data breaches happen?

Data breaches don’t usually happen because someone just stumbles onto a password. In fact, most databases don’t store plain passwords but use something called password hashes—a scrambled version of the password that needs to be cracked to be useful. Unfortunately, even hashed data can be vulnerable.

Here’s how a Reddit user tries to explain the possible ways of data breaches:

To sum up, data breaches can happen in various ways:

• Vulnerabilities in applications: One common method is through SQL injections. This is a process through which hackers manipulate a website’s code to gain access to the database.
  
• Misconfigurations: Sometimes, databases are left exposed to the public internet with weak or default passwords, making them an easy target. A simple misconfiguration can make an entire database accessible to anyone with an internet connection.
  
• Privilege escalation: Hackers can exploit privilege escalation vulnerabilities, allowing them to gain unauthorized access to sensitive information. This often happens after a hacker gains initial access to a system and gradually infiltrates it.
  
• Insider threats: Data breaches can also happen from the inside—employees with access to sensitive data may misuse it, either intentionally or by accident.
  
• Backup vulnerabilities: Many businesses forget that their backups are just as vulnerable as the live database. If backups aren’t properly secured, hackers can target them just as easily.

Now that you know how breaches happen, let’s look at some of the strategies to prevent them:

1. Implement strong security measures

Having a robust security system is your first line of defense to protect your customer data. Make sure to have these practices in place:

Encryption: All sensitive information, including personal data, contact information, and payment-related details, should be encrypted in two conditions: in transit (while it’s being sent across the Internet) and at rest (when it’s stored). This ensures that, even if data is accessed, it can’t be read without the decryption key.

Secure access controls: Limit access to sensitive customer data. Not everyone in your organization needs to have access, and those who do should only access it for specific, authorized purposes. You can also implement multi-factor authentication (MFA) and role-based access control (RBAC) to ensure data is only available to the right people.

Regular Audits: Perform frequent security audits to identify potential weaknesses in your security measures. By reviewing and testing your systems proactively, you can find and fix vulnerabilities before they’re exploited.

Recommended read: The Quick Guide to Google Apps Security for Your Business

2. Collect as little data as possible

One of the most effective ways to reduce risk is by simply holding less data.

• Collect only what’s necessary: Only gather the customer data that’s truly needed for your operations. Excessive data collection not only increases your security burden but also raises privacy concerns.

• Limit data storage: Set up a data retention policy that ensures data is kept only as long as necessary. For instance, you don’t need data of the customers who have churned. Periodically review all these stored data and delete anything that’s no longer needed. This minimizes the impact of a breach.

3. Train your employees with security best practices

Your employees are the ones that work the most with customer data. So, they play an important role in data protection. Empower your employees with regular training:

• Ongoing security training: Conduct regular training sessions to educate employees on best practices for data handling, password security, and recognizing phishing attacks. This reduces the chances of data being compromised through carelessness or ignorance.

• Awareness programs: Run continuous awareness programs to create a culture of security. These programs help remind employees of the importance of protecting customer data and following company protocols.

4. Invest in data protection tools

Leverage technology to keep your customer data protected at all times. There are tools available that can significantly enhance security efforts:

• Customer Data Platforms (CDPs): A CDP  like Segment and Bloomreach centralizes customer data in one place, helping you manage and protect it more effectively. With a CDP, you can enforce data governance policies and improve transparency in data usage.

• Firewalls and monitoring systems: Install firewalls and intrusion detection systems to monitor and block unauthorized access attempts. Tools like these are your first defense against external attacks.

5. Compliance with data protection regulations

Every business must comply with the major data protection laws in the country where it is located. But this mandate is not just about avoiding hefty penalties. It is also a sign of trust and transparency to your customers. 

Also, always get clear, explicit consent before collecting any personal information from your customers. Make sure they know exactly what data you’re collecting, why you need it, and how it will be used.

Here are some of the regulations based on the type of data you collect and the area where your business operates:

• Health Insurance Portability and Accountability Act (HIPAA): This U.S. law focuses on safeguarding health information. It ensures the security and privacy of patient data, specifically in communications between patients and healthcare providers. So, if you’re in the healthcare industry, you’ll need to comply with HIPAA to protect patient records.
  
• Fair Credit Reporting Act (FCRA): This U.S. regulation concerns credit data. It governs who can access, store, and share credit information, ensuring that sensitive financial details are kept secure and only used appropriately.
  
• California Consumer Privacy Act (CCPA): If your business operates in California or collects data from California residents, you must follow the CCPA. This act gives individuals more control over their personal data, requiring businesses to disclose what they’re collecting, how it’s used, and with whom it’s shared.

• Family Educational Rights and Privacy Act (FERPA): If you work in the education sector, FERPA helps protect the privacy of student records in U.S. Schools. Educational institutions must follow these guidelines to ensure student information is handled with care.
  
• General Data Protection Regulation (GDPR): For businesses that handle data from European Union citizens, GDPR sets the gold standard for data protection. It regulates how personal data is collected, processed, and stored, with a strong emphasis on obtaining explicit consent from individuals and ensuring data security.

• Payment Card Industry Data Security Standard (PCI DSS): If your business handles credit card transactions, you need to comply with PCI DSS. This set of security standards ensures that companies protect cardholder data to prevent fraud and breaches.

• Personal Information Protection and Electronic Documents Act (PIPEDA): In Canada, PIPEDA governs how private sector organizations handle personal information. It sets guidelines for the collection, use, and disclosure of personal data, ensuring that individuals have control over their information.

• Brazilian General Data Protection Law (LGPD): Similar to GDPR, the LGPD in Brazil regulates the use of personal data, requiring businesses to obtain consent and protect individual privacy. It applies to companies that process the data of Brazilian residents, regardless of where the business is based.

Pro tip: It’s not just about your own business—you’ve got to make sure that the brands you partner with are following these data protection regulations as well. When you collaborate with other brands – for instance, a CRM or a help desk, there’s a good chance you’ll be sharing some of your customer data with them. And if they’re not handling that data securely, you might have to deal with the fallout. So, do your due diligence and ensure your partners are also complying with the necessary laws.

6. Have an action plan for data breaches

Sometimes, you just can’t avoid it. Even with the best precautions, breaches can still happen. That’s why it’s important to have a plan in place:

• Create a data breach response plan: This plan should outline how your business will respond to a data breach. This plan should include how to notify affected customers, contain the breach, investigate the issue, involve necessary legal teams, and prevent future incidents.

• Test and update the plan: Make sure your response plan is tested regularly and updated as needed. A well-practiced plan can minimize the damage in case of a breach.

Gain Your Customers’ Trust By Protecting Their Data

As a business, protecting your customers’ data is your responsibility. When your customers know their data is safe, they trust you. And that’s what will keep them coming back to you. We hope that with this guide, you have gotten a better understanding of the consequences of data breaches and the strategies you can implement to protect your customers’ data effectively. 

On a side note, if you’re looking for a help desk that takes data protection seriously, Hiver is a good choice. With GDPR and HIPAA compliance, Hiver ensures your customer data is secure at every touchpoint. It centralized your customer conversations without compromising on data security best practices. 

And the best part is that it integrates with your inbox – so you don’t have to migrate all your data to another platform. 

Start a free trial to explore more. 

Frequently Asked Questions (FAQs)

1. Why is customer data protection so important for my business?
   
   Customer data protection is crucial because it helps build trust with your customers. When customers know that their personal information is safe, they’re more likely to stay loyal to your brand. Plus, it keeps you on the right side of the law, avoiding hefty fines and potential damage to your reputation.

2. What are the biggest risks of not protecting customer data?
   
   Not protecting customer data can lead to costly data breaches, legal penalties, and a loss of customer trust.
   
3. How do I know which data protection laws apply to my business?
   
   The regulations you need to follow depend on where your business operates and who your customers are. For example, GDPR applies to data from European Union citizens, while CCPA applies to residents of California. It’s a good idea to consult with a legal expert to make sure you’re compliant with the necessary laws.

4. How can I make sure my employees are helping to protect customer data?
   
   Employee education is key. Regular training on data security, recognizing phishing attempts, and best practices for handling sensitive information can go a long way in preventing accidental data breaches. Create a culture where security is everyone’s responsibility.