Summary: It is very difficult to imagine any sector of the economy that is not impacted by technology, disruptions, startups and questions like “Why should it be like this?” are more and more frequent. The digital revolution is everywhere, from the countryside to industries, banks, schools, government, transportation, insurance. The moment we are living in is unique. Time has come for privacy and more and more countries and companies are seeing the need to protect privacy as an important asset. In order to support companies in this journey of adaptation, the so-called “PrivacyTech” began to emerge between 2016 and 2017, aiming at a promising market for companies that need solutions for privacy protection and personal data management.
It is very difficult to imagine any sector of the economy that is not impacted by technology, disruptions, startups and questions like “Why should it be like this?” are more and more frequent. The digital revolution is everywhere, from the countryside to industries, banks, schools, government, transportation, insurance – there is no sector that cannot be revolutionized by technology and there is no economy that does not depend on technology.
The emergence of the “techs”
Startups that aim to serve or revolutionize sectors or sub-sectors through technology are what we call “techs”.
Financial + Technology = Fintech
Advertising + Technology = Adtech
Law + Technology = LegalTech
Government + Technology = GovTech
Insurance + Technology = Insurtech
HR + Technology = HRTech
Agriculture + Technology = Agritech
Variations become more popular as more technological solutions make our lives easier compared to traditional means such as GreenTechs that create sustainable products and clean energy or EdTechs that are increasingly popular and seek to revolutionize education and the means of learning at all ages.
It is noteworthy that several terms have been used in the literature for decades, such as “EdTech” that has been used since the 90s in relation to technologies applied to teaching. In 1865 Giovanni Caselli invented the Pantelegraph, which inspired the Fax, which among its uses was the verification of bank signatures and emerged as a technology of the time to solve a problem of financial confidence. But we don’t have to go this far. In 1950 Frank X. McNamara created Diners Club which was the basis for credit cards until today or even in the 1960s when Quotron Systems used technology to deliver financial quotes in real time on a terminal instead of the printed model, all this by the sound of The Beatles.
The “tech” revolution does not necessarily mean the use of technology, because all sectors already used technology in one way or another, but the use of new technologies to make life easier compared to traditional means, be it digital or analog media, optimizing processes, reducing costs, increasing profits and delivering better results in an increasingly populous and digital world.
Through an analysis of Google Trends search patterns, one can conclude that the “Techs” revolution started somewhere between 2014 and 2016 when the terms began to be used in fast-paced popular businesses and attracted the attention of the masses through startups.
Popularity in 2015
Popularity in 2017
Popularity in 2020
As can be seen, the increase in popularity of technology-based companies in sectors of the economy was significant in less than 5 years and the trend is for an increasingly exponential growth. The use of emerging technologies such as IoT in agriculture, blockchain for logistics, DigitalTwins in the industry and artificial intelligence in insurance end up increasing the results obtained by these companies when compared to traditional models.
Even so, some sectors are beginning to show a saturation of investments and relative delay in concrete results for investors, as is the case of Agritechs, which although they are at a time of growth in Brazil, investment in food technology and agricultural services throughout the world fell nearly 5% in 2019, showing that investors are paying less attention to the sector amid a downturn, according to a report by the Financial Times. This drop is a stark contrast to 2018, when venture capital funds doubled their investments compared to the previous year.
The age of privacy
The moment we are living in is unique. Time has come for privacy and more and more countries and companies are seeing the need to protect privacy as an important asset.
Recent cases such as the Cambridge Analytica scandal demonstrate the urgent concern with privacy and above all with the protection of personal data for all of us. Data leaks increased by more than 54% in the first 6 months of 2019 compared with the same period in 2018, according to a study by the consultancy RiskBased Security4. And more than 3,800 leaks were recorded, compromising about 4.1 billion individual records. The financial losses generated by these leaks alone can be estimated at almost $15 billion, considering that the average cost of a single leak is $ 3.9 million, according to the Ponemon Institute.
With the concern to protect people’s data, several countries already have specific laws that force companies to treat their holders’ data responsibly, which involves both data collection, use, sharing and future removal when the data is not necessary for the purpose of the original collection any longer.
In Brazil, the LGPD comes into force in August 2020 and, like the GDPR in the European Union, the Brazilian law seeks to rescue privacy as a fundamental right for all, though already provided for in the constitution, is now supported by a data protection law, which gives people a series of rights regarding the use of their data.
For companies, obligations and sanctions remain. However, companies should not take it as a negative as obligations and sanctions are necessary to give legitimacy to the law and to ensure that it is effectively enforced, given the importance for the country to be at an adequate level of compliance if one wants to acquire global trust for businesses that involve the exchange of personal data. It is an opportunity for companies to implement good corporate governance practices, information security, rethink values and work on culture through methodologies such as “privacy by design.”
The PrivacyTech revolution
In order to support companies in this journey of adaptation, the so-called “PrivacyTech” began to emerge between 2016 and 2017, aiming at a promising market for companies that need solutions for privacy protection and personal data management.
According to Google Trends, it was only in 2017 that the term started to be used and has not yet reached its peak compared to the other “techs”, which being even less popular in some regions of the world including Brazil, represents a great opportunity for investments in the sector.
Founded in Portsmouth in the USA right after the “millennium bug” (2000), the IAPP (International Association of Privacy Professionals) is today the largest global and free content repository regarding privacy and gathers a lot of data and content from professionals across the world on this important topic. On the association’s website it is possible to find a catalog of companies that offer solutions to support projects to protect personal data, or, in privacy projects, the so-called “PrivacyTech”.
As of the writing of this article, the report was in version 3.2 and just under 300 companies were qualified worldwide; still a low number if one compares the magnitude of investments and the urgency of this demand. According to the FPF (Future of Privacy Forum), the American company OneTrust announced that it had raised more than $200 million in series A of investments, something that was repeated in 2020 in series B with another $210 million invested. Other companies like TrustArc, which sought more than $70 million in its fourth round of investments and smaller companies such as BigID ($30 million) and Privitar ($30 million) are also making giant leaps towards success.
In Brazil, the reality has not yet reached the figures above, but some pioneering companies are emerging in the privacy market such as the DpTrue platform from PrivacyTools , which offers a platform for LGPD and is one of the few startups in Latin America, according to an IAPP report. The startup, founded in 2019, has already received investments from an accelerator and seeks expansion in the national market driven by the search for companies that provides solutions for compliance with the general data protection law. Other companies like RocketChat, a Brazilian startup that’s offers a communication platform and an alternative to Spark, was also mentioned in the IAPP privacy report. Usually, organizations use a number of tools, like assessment managers or data mapping solutions. Rocket.Chat is listed in the category of “Enterprise Communications”, helping organizations communicate internally in a secure way in order to avoid embarrassing or dangerous leaks of communications.
The future of privacy
Overall, the privacy market has improved, press attention is steady, the number of privacy-related stories is increasing across all channels, and the recent wave of high-level fines and warnings of intent against Facebook ($5 billion), British Airways (£183 million) and Marriot (£99.2 million) certainly caught the eye.
According to the IAPP in an interview with companies from different segments, budget is still a problem. Privacy has taken center stage in recent months and the focus on compliance has increased, but this was not reflected immediately in companies’ budgets.
The challenge of selling a privacy program to senior management is that the benefits are not yet widely understood and there are no tangible benefits. You cannot see it, you cannot touch it, and it is very difficult to demonstrate a return on investment, unless there is a breach or there are violations and sanctions applied to similar companies or a direct competitor that would lead the board of directors to question: “What if it happens to us?”
Creating an effective privacy framework requires cultural change. A change that takes time and offers benefits that are not always immediately visible, but many companies and, in fact, shareholders are not patient and expect immediate results. Investing in technology for privacy (PrivacyTech) costs money. For an organization to spend money, there must be a benefit, and for many, the benefits are not yet tangible.
Investing in PrivacyTech requires companies to start seeing #privacy as an asset. #respectdata Click to Tweet
This change, which is seeing privacy as an asset, requires a change in the corporate mindset. Privacy and data protection as a whole needs to be seen as a competitive differentiator, not a burden and when this happens in Brazil as it has already been happening in the rest of the world, PrivacyTech will be expanding and in strategic positions in all sectors of the economy, including the other “techs.”