Our last edition of privacy predictions focused on a few important trends where business and government interests intersect, with regulators becoming more active in a wide array of privacy issues. Indeed, we saw regulatory activity around the globe. In the US, for example, the FTC has requested public comments on the “prevalence of commercial surveillance and data security practices that harm consumers” to inform future legislation. In the EU, lawmakers are working on the Data Act, meant to further protect sensitive data, as well as a comprehensive AI legal strategy that might put a curb on a range of invasive machine-learning technologies and require greater accountability and transparency.

On the other hand, we saw the repeal of Roe vs Wade and the subsequent controversy surrounding female reproductive health data in the US as well as investigations into companies selling fine-grained commercial data and facial recognition services to law enforcement. This showed how consumer data collection can directly impact the relationships between citizens and governments.

We think the geopolitical and economic events of 2022, as well as new technological trends, will be the major factors influencing the privacy landscape in 2023. Here we take a look at the most important developments that, in our opinion, will affect online privacy in 2023.

1. Internet balkanization will lead to more diverse (and localized) behavior tracking market and checks on cross-border data transfer.

   As we know, most web pages are crawling with invisible trackers, collecting behavioral data that is further aggregated and used primarily for targeted advertising. While there are many different companies in the business of behavioral ads, Meta, Amazon, and Google are the unquestionable leaders. However, these are all US companies, and in many regions, authorities are becoming increasingly wary of sharing data with foreign companies. This may be due to an incompatibility of legal frameworks: for example, in July 2022, European authorities issued multiple rulings stating use of Google Analytics may be in violation of GDPR.

   Moreover, the use of commercial data by law enforcement (and potentially intelligence bodies) makes governments suspicious of foreign data-driven enterprises. Some countries, such as Turkey, already have strict data localization legislation.

   These factors will probably lead to a more diverse and fragmented data market, with the emergence and re-emergence of local web tracking and mobile app tracking companies, especially on government and educational websites. While some countries, such as France, Russia, or South Korea, already have a developed web tracking ecosystem with strong players, more countries may follow suit and show a preference for local players.

   This might have various implications for privacy. While big tech companies may spend more on security than smaller players, even they have their share of data breaches. A smaller entity might be less interesting for hackers, but also faces less scrutiny from regulatory bodies.

2. Smartphones will replace more paper documents.

   Using smartphones or other smart devices to pay via NFC (e.g., Apple Pay, Samsung Pay) or QR code (e.g., Swish in Sweden, SBPay in Russia or WeChat in China) is rapidly growing and will probably render the classic plastic debit and credit card obsolete, especially where cashless payments already dominate. COVID-19, however, showed that smartphones can also be used as proof of vaccination or current COVID-negative health status, as many countries used dedicated apps or QR codes, for example, to provide access to public facilities for vaccinated citizens.

   Why stop there? Smartphones can also be used as IDs. A digitized version of an ID card, passport or driver license can be used instead of the old-fashioned plastic and paper. In fact, several US states are already using or plan to use digital IDs and driver licenses stored in Apple Wallet.

   Having your ID stored on a phone brings both convenience as well as risks. On the one hand, a properly implemented system would, for example, allow you to verify at a store that you are of legal age to buy alcohol without brandishing the whole document with other details like name or street address to the cashier. Also digitized IDs can significantly speed up KYC procedures, for example, to apply for a loan online from a smartphone.

   On the other hand, using a smartphone to store an increasing amount of personal data creates a single point of failure, raising serious security concerns. This places serious demands on security of mobile devices and privacy-preserving ways of storing the data.

3. Companies will fight the human factor in cybersecurity to curb insider threat and social engineering to protect user data.

   As companies deploy increasingly comprehensive cybersecurity measures moving from endpoint protection to XDR (eXtended Detection & Response) and even proactive threat hunting, people remain the weakest link. According to estimates, 91% of all cyberattacks begin with a phishing email, and phishing techniques are involved in 32% of all successful data breaches. Also, a lot of damage can be done by a disgruntled employee or a person who joined the company for nefarious purposes. The FBI has even warned recently that deep fakes can be used by those seeking remote jobs to confuse the employer, probably with the goal of gaining access to internal IT systems.

   We expect less data leaks caused by misconfiguration of S3 buckets or Elasticsearch instances, and more breaches caused by exploiting the human factor. To mitigate these threats, companies might invest in data leak prevention solutions as well as more thorough user education to raise cybersecurity awareness.

4. We will hear more concerns about metaverse privacy – but with smartphones and IoT, aren’t we already in a metaverse?

   While skeptics and enthusiasts keep fighting over whether a metaverse is a gamechanger or just a fad, tech companies and content creators continue to polish the technology. Meta has recently announced Meta Quest Pro, and an Apple headset is rumored to appear in 2023. Some, however, raise concerns over metaverse privacy. While smartphones with their multiple sensors from accelerometers to cameras can feel quite intrusive, a VR headset is in a league of its own. For example, one of the latest VR headsets features four front-facing cameras, three cameras on each controller and several cameras to track eyes and facial expressions. This means that in a nightmare scenario such devices would not only have a very deep insight into your activity in the metaverse services provided by the platform, they may be very effective, for example, in reading your emotional reaction to ads and making inferences about you from the interior of your home — from what colors you like to how many pets and children you have.

   While this sounds scary (which is why Meta addresses these concerns in a separate blog post), the fears might actually be exaggerated. The amount of data we generate just by using cashless payments and carrying a mobile phone around during the day is enough to make the most sensitive inferences. Smart home devices, smart cities with ubiquitous video surveillance, cars equipped with multiple cameras and further adoption of IoT, as well as continuous digitalization of services will make personal privacy, at least in cities, a thing of the past. So, while a metaverse promises to bring offline experiences to the online world, the online world is already taking hold of the physical realm.

5. Desperate to stop data leaks, people will insure against them.

   Privacy experts are eagerly giving advice on how to secure your accounts and minimize your digital footprint. However, living a convenient modern life comes with a cost to privacy, whether you like it or not: for example, ordering food deliveries or using a ride-hailing service will generate, at the very least, sensitive geodata. And as the data leaves your device, you have little control over it, and it is up to the company to store it securely. However, we see that due to misconfigurations, hacker attacks and malicious insiders, data might leak and appear for sale on the dark web or even on the open web for everyone to see.

   Companies take measures to protect the data, as breaches cause reputation damage, regulatory scrutiny and, depending on local legislation, heavy fines. In countries like the US, people use class action lawsuits to receive compensation for damages. However, privacy awareness is growing, and people might start to take preventive measures. One way to do that might be to insure yourself against data breaches. While there are already services that recoup losses in case of identity theft, we could expect a larger range of insurance offers in the future.

We have looked at several factors that, in our opinion, will most prominently affect the way data flows, and possibly leaks, between countries, businesses and individuals. As the digital world continues to permeate the physical realm, we expect even more interesting developments in the future.