Digital trust is a must-have for consumers. How can companies ensure they deliver?

This is a summary of an article that was originally published by McKinsey & Company. Copyright (c) 2021 All rights reserved. Reprinted by permission.

The results of a recent McKinsey & Company survey of more than 1,300 business leaders and 3,000 consumers globally suggest consumers expect companies to establish digital trust. McKinsey defines digital trust as confidence in an organization to protect consumer data, enact effective cybersecurity, offer trustworthy AI-powered products and services, and provide transparency around AI and data usage.

The research also indicates that organizations that are best positioned to build digital trust are more likely than others to see higher annual growth rates on their top and bottom lines. While only a small contingent of companies surveyed are set to deliver on this trust, the research suggests what these companies do differently.

Consumers report that digital trust truly matters, and most believe that the companies they do business with provide the foundational elements of digital trust.

Most respondents say it’s important for companies to provide transparency around their digital-trust policies. They also want clarity about how their data will be used. Nearly half of all respondents frequently consider another brand if the one that they are considering purchasing from is unclear about how it will use their data. These figures increase among some segments, such as Gen Z.

Consumers even believe some digital-trust tenets are nearly as important as common purchase decision factors, such as cost and delivery time. “Sales, marketing, and operations teams are likely spending time every day discussing the impact that factors such as pricing and delivery times have on customer behavior,” says McKinsey Associate Partner Liz Grennan. “The survey results suggest that it is time to ensure that digital trust is incorporated into these conversations as well.”

And a substantial proportion of respondents will take their business elsewhere if trust is violated: forty percent of all respondents report that they have pulled their business from a company after learning that the company was not protective of its customers’ data. This rate increases among frequent online shoppers, B2B purchasers, and Gen Z respondents.

However, consumer confidence in companies to deliver digital trust is fairly high, suggesting this trust is for businesses to lose.

For example, consumers express a surprisingly high degree of confidence in AI-powered products and services compared with products that rely mostly on humans. More than two-thirds of consumers say that they trust products or services that rely mostly on AI the same as, or more than, products that rely mostly on people.

When it comes to data protections, 59 percent of consumers think that, in general, companies care more about profiting from their data than protecting it; however, most respondents have confidence in the companies they choose to do business with. Seventy percent of consumers express at least a moderate degree of confidence that the companies they buy products and services from are protecting their data.

And the data suggest that a majority of consumers believe that the businesses they interact with are being transparent—at least about their AI and data privacy policies. Sixty-seven percent of consumers have confidence in their ability to find information about company data privacy policies, and a smaller majority, 54 percent, are confident that they can surface company AI policies.

The research shows that companies have an abundance of confidence in their ability to establish digital trust. Nearly 90 percent believe that they are at least somewhat effective at mitigating digital risks. However, the data show that this assuredness is largely unfounded. Less than a quarter of executives report that their organizations are actively mitigating a variety of digital risks across most of their organizations, such as those posed by AI models, data retention and quality, and lack of talent diversity. Cybersecurity risk was mitigated most often, though only by 41 percent of respondents’ organizations

Given this disconnection between assumption of coverage and lack thereof, it’s likely no surprise that 57 percent of executives report that their organizations suffered at least one material data breach in the past three years. Further, many of these breaches resulted in financial loss (42 percent of the time), customer attrition (38 percent), or other consequences.

A similar 55 percent of executives experienced an incident in which active AI (for example, in use in an application) produced outputs that were biased, incorrect, or did not reflect the organization’s values. These AI mishaps, too, frequently resulted in consequences.

Digital-trust leaders are defined as those companies with employees who follow codified data, AI, and general ethics policies and that engage in at least half of the best practices for AI, data, and cybersecurity that McKinsey asked about. These companies are outperforming their peers both in loss prevention and business growth.

The companies doing the most to establish digital trust are less likely to have experienced a negative AI incident in the past three years. Forty percent of digital-trust leaders experienced an adverse event in the past three years versus 53 percent of all other institutions. Leaders in digital trust are also less likely to have suffered a data breach, though the difference is less stark: 49 percent versus 57 percent of all others.

Digital-trust leaders are 1.6 times more likely than the global average to see revenue and EBIT growth rates of at least 10 percent. In fact, with every step of progress a company makes toward establishing robust digital trust, there’s a correlative increase in the likelihood that a company reports these higher revenue and EBIT growth rates.

A look at the practices of digital-trust leaders shows that their success starts with goal setting. First, they simply set more goals—leaders in digital trust set twice as many goals for trust building (six) than all other organizations. They are also more likely to focus on value-driving goals—particularly, strengthening existing customer relationships and acquiring new customers by building trust and developing competitive advantage through faster recovery from industry-wide disruptions.

As digital-trust leaders pursue these goals, they are more likely to mitigate every single digital risk McKinsey asked about, from the most obvious, such as cybersecurity, to the less so, such as those associated with cloud configuration and migration.

And while, by definition, digital-trust leaders engage in at least half of all the AI, data, and cybersecurity practices McKinsey asked about, they are also about twice as likely to engage in any—and every—single one.

“Perhaps it is not surprising that the companies that are good at building digital trust are also more likely to experience the best financial performance,” says McKinsey Partner Jim Boehm. “We wondered if the reason for this is because these companies simply execute better, and that sound execution results in trust. But the difference in the nature and number of their goals, as well as their commitment to most best practices, suggest a deliberate focus on a trust-building strategy and on performing with superior resilience during periods of great disruption. Our final conclusion is that in a digitally connected and data-driven world, achieving digital trust is a major strategic imperative and a huge business differentiator.”