This explosion in digital data practices is due, in large part, to emerging technologies that offer innovative ways to utilise data.

The mobile advertising industry today can track you from app to app by your phone’s identifier and then serve you relevant adverts. Brick and mortar retailers have ‘smart stores’ that track your phone’s location and deduce what sort of products will interest you, then text a ‘just in time discount’ coupon.

Innovation knows no bounds, but as innovation drives business, customers are becoming concerned about their privacy, and rightly so.

Government is in on the action as well. The revelations about the NSA’s massive data collection programme in the US have only amplified privacy concerns. Why was there so much outrage over the NSA revelations? A lack of transparency, that’s why.

The strategic lesson is that innovation without transparency can breed suspicion and a lack of trust. Innovation combined with transparency is powerful and builds trust.

When asked to cite companies they considered to be the most trustworthy collector of consumer data in a recent Toluna study, 16% of respondents mentioned Amazon, more than any other company.

It also revealed that 84% of UK consumers (86% of US consumers) trust companies that are transparent about their online data practices and 75% would buy more from those companies.

They like the innovative ways the business uses data in combination with its openness about its data practices. Amazon builds relationships with its customers, and interacts and suggests products that consumers might like. Amazon is open with consumers and, as a result, they trust the brand. 

Any discussion, however, about data collection practices would be incomplete without mentioning a growing trend in privacy laws.

The public unease with new and powerful data collection practices has spawned a flurry of US and EU privacy legislation, much of it transparency-centric.

These laws are an easy sell because they reflect the public mood. In a recent study by The Economist, only 26% of UK residents think businesses are transparent enough in how they use customers’ personal data and 75% think regulation preventing the misuse of such information is too weak.

Here in the US, California recently implemented a transparency law requiring websites to disclose their online data practices. At the national level, FTC Commissioner Julie Brill has long voiced unease over the ‘Big Data’ industry and recently called upon Congress to pass a ‘Big Data’ transparency law.

And President Obama recently formed a committee to investigate the comprehensive issues of big data and privacy.

In a timely coincidence, the EU is overhauling the aging EU Privacy Directive, its pan-European privacy framework. A central theme of the proposed privacy regulation may be increased transparency obligations on data collectors.

Consumers are demanding transparency. Now is the time to get ahead and develop a transparency strategy that informs the consumer about your online data practices in a meaningful way that is both comprehensive and clear.

You’ll be doing the right thing for your business, while at the same time complying with the fast approaching transparency laws.