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Subscription Business Model May Impact Customer Privacy

By Deanne Katz, Esq. | Last updated on

Make a sale and you get paid once; set up a subscription sales model and you get paid every month. The drawback: you're going to have to save financial data for your customers and that can create privacy issues.

First the positive: Subscription business models are booming for online businesses. Rather than selling a customer something once, the subscription model guarantees that same sale once a month without any extra work.

Setting up a subscription model for items that are necessary or that customers are passionate about can mean more sales and better relationships with your clients.

But to keep collecting payment you have to find a way to save customers' financial data.

Most states have strict consumer protection laws about financial data such as credit cards and bank accounts. Merchants who save that information have a responsibility to take steps to protect that information.

Depending on the state that might require a written policy on how financial data is saved or a procedure to deal with a possible breach of security. An attorney can help you understand the specific requirements in your state.

The Federal Trade Commission also has specific requirements for handling customer data. As a boon to small business owners, they also have some suggestions to minimize the damage is a breach happens.

Some personal data is necessary but make sure the information stored isn't more than you need. Keeping additional information is a recipe for disaster and it could come back to bite you if the data falls into the wrong hands.

If at all possible, keep financial data off the internet.

There are many more opportunities for hacking when data is stored online and while it may be convenient, it isn't safer for your customers. Setting up computer software to monitor for and detect potential security breaches is another way to protect customers' financial data. Good software will let you minimize leaked information and identify what data got out.

Subscription business can be a huge benefit to a small company but don't jump the gun and start before you're ready to handle the responsibility of customer privacy. It takes a while to build up customer trust but it doesn't take much to lose it.

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