Credit card companies and other loyalty programs have so far been mapping customers’ buying pattern and transaction data. The collected data is then curated and sold to digital advertising and marketing companies for big bucks.
Advertisers create demographic profiles of customers, factoring in their geographical location, average monthly spending, product preferences etc. This will enable them to send out targeted advertisements to the users. So, if you see advertisements of products similar to what you just bought at your neighborhood supermarket chain or on your favorite online store, don’t be surprised. That’s your transaction and purchase information at play, thanks to credit card companies.
To give you a feel of numbers, MasterCard alone provides data of over 100 billion customer purchases to marketing and advertising agencies. Even though they claim that the data is anonymized, the very thought of your personal information at the hands of companies that profile you according to your geographical location, spending pattern and preferences makes anyone uncomfortable. The amount of data possessed by credit card companies is sufficient to profile anyone, track their movements and even make relatively accurate predictions with the right set of algorithms.
Not for long, hopefully. If Bitcoin gains widespread adoption as a mainstream currency in the near future, then the usage of credit cards can be expected to drop. This means, they won’t be able to collect sufficient data on all its customers (provided there will be any) forcing advertisers to rethink their strategies. Unlike credit cards, with Bitcoin transactions, sender’s information is not readily accessible. Even though there are ways one can a get few pieces of information about a transaction from the blockchain, using best practices for Bitcoin transactions will render those useless.
Bitcoin will temporarily slow these companies from gathering personal and transactional data. It is only a matter of time before they find a technology/service that might help them overcome the situation. Companies like Chainalysis are coming up with services that they claim to help companies track and analyze Bitcoin transactions. Only time will tell whether they will be able to do that on a large scale, covering all Bitcoin transactions. Then, the degree of accuracy of such data gathered is something to be focused upon as well.
Bitcoin may sound the death knell for businesses that are heavily dependent on transactional data. If you are into such business, it is time to innovate whereas others just have to wait and watch.