Growing interest in smartwatches has sparked user privacy concerns as companies find ways to collect and use personal health, location and purchasing data found on the wearable devices of their customers and workers.
"Consumers need to demand, at a minimum, clear information about what exactly the collected information will be used for," said Irina Raicu, director of Internet ethics at the Markkula Center for Applied Ethics at Santa Clara University in an email. "The broader privacy concern is that information collected from various [wearable] sources is increasingly being combined to create profiles from individual users and draw inferences about their future actions, preferences, etc."
Some experts worry that a smartwatch user's health and fitness stats, location or buying habits could be discovered and later used against the owner -- to deny a work promotion or an insurance claim or to cause any number of other problems. The question isn't whether the personal data is being collected — it already is, increasingly — but how the parties collecting the information use the data.
Part of the problem is that users expect their personal information to remain anonymous when, in fact, there isn't good or widespread technology to anonymize data, said Forrester analyst Fatemeh Khatibloo.
"Consumers are beginning to expect this kind of data sharing from a wearable or any other Internet of Things device, with the assumption that a company will attempt to anonymize the data and aggregate it and sell it, but is not going to sell the PII" -- the personally identifiable information, Khatibloo said in a telephone interview.
In theory, a smartwatch vendor or other party could collect huge masses of personal data from millions of smartwatch users to create an audience segment that is then sold to a data management platform without including PII. "Then, somebody could send those users an ad for weight-loss stuff, but that gets a bit sketchy because we don't have really good tech that anonymizes data," Khatibloo explained.
"There's data collection and data use, and if we're being upfront, businesses need to have a much clearer data use policy. If they are collecting data, they are creating risk," Khatibloo said.
Government action urged
A government entity, particularly in the U.S., needs to step in before it's too late, Khatibloo said. If a company didn't get permission to use a person's data, there should be significant fines, she argued. "It has to be a government role; I don't think self-regulating trade bodies will do that effectively," she said.
Privacy experts have taken to heart last year's instance of a personal injury lawyer who used a Canadian woman's Fitbit data to show how an accident had affected her ability to work. The lawyer relied on analytics software from Vivametrica, which tracked the woman's physical activity.
"I worry about what will happen" if the data is used against a smartwatch owner in a future case, Khatibloo said. "There's a lot of information on a wearable. Maybe a car insurance company could subpoena somebody's smartwatch data saying she didn't sleep well last night or slept only four hours a night, which led to an accident. That's the kind of stress that wearable users have to worry about. We don't have a good handle on the use of that data from a regulatory perspective and we need to write regulations to encompass all these…egregious and discriminatory uses of data."
Fitness data used to lower insurance rates
At a few companies, fitness data from smartwatches and fitness bands worn by employees is being used to prove they are staying physically active, which in turn is used to help lower corporate insurance rates. Cloud computing provider Appirio has reported a 5% decline in its corporate insurance rates as a result of such a program, said Forrester analyst JP Gownder.
Separately, insurer John Hancock's Vitality program offers up to 15% off its life insurance to customers who voluntarily share health data collected in part via a free Fitbit wrist wearable, Gownder said. Members of the program get Vitality points by going to the gym, staying tobacco free or getting annual health screenings.
"The systemwide issue is how the individual feels about this trend," Gownder said. "For the benefits I'm getting, what are the risks? If my health data is out there and somehow gets compromised, it might show that I'm not very active and you wonder how that can hurt you. There are a lot of questions."
If companies gather data on products a person buys or how often he or she works out, the data might be used to populate an algorithm used to predict heart disease or diabetes. Some analytical tools look not only at how many steps a person takes while wearing a device, but even the distance between steps as an indicator of a health problem, Gownder said.
"Theoretically, it's quite possible and suspect that a person won't get a job because he's some kind of a couch potato," Gownder said. "These new devices are opening up all kind of categories for potential discrimination."
One possible scenario is that a business might track a smartwatch user's location to see how many times he or she leaves his desk to have a bathroom break or a smoking break, said Carolina Milanesi, chief of research at Kantar WorldPanel. "Think about being the first time that data is used against a pregnant employee," she said. "The scenarios are endless."
Strategic value with wearables for workers and customers
Companies of all types are focused on using smartwatches and other wearables both for their employees and their customers. A survey of 500 business professionals conducted in March found that all were using or planning to implement wearable technology for workers and customers, and that 79% felt such devices would be strategic to their company's future success.
The survey, conducted by a division of Salesforce, predicted a tripling of growth for employee wearable use cases in the next two years, mainly to improve the customer experience. These include business analytics and alerts, but also an employee's biometric data.
For customer wearable tech, the survey found the biggest growth area will be in integrating mobile apps and location-sensing technology onto customer's wearable devices.
Location will not only be possible with GPS, which is found in some smartwatches already, but also through monitoring of indoor location, such as through the gates and doorways the user passes through, which can be activated via Bluetooth or other wireless technology available from a smartwatch.