We’re living in a world where customers are locking down their data—and for good reason. From government regulations to platform restrictions and a spike in cyberattacks, data privacy is reshaping how brands engage their audiences. But loyalty programs offer a rare path forward. Built on consent, value exchange, and transparency, they remain one of the few places where personalization still feels personal, not invasive. The question is: Is your loyalty program ready for the privacy-first future?

Today’s digital ecosystems, cloud-first architectures, and AI-driven personalization engines are redefining how brands gather and use customer data. And if not handled with care, this same data can become a source of breach, backlash, and brand erosion.

The Rising Threat of Data Breaches in 2025

The first half of 2025 has underscored just how vulnerable even the biggest brands are to data breaches. In March, a massive breach at Oracle Cloud’s Single Sign-On (SSO) system exposed sensitive credentials from over 140,000 tenant environments, including access tokens and encrypted keys. Even more recently, Adidas reported a data leak through a third-party service provider, putting customer contact information at risk—raising fresh concerns about the security of loyalty-linked data.

These incidents are part of a broader trend: attackers are using more sophisticated, AI-powered methods to exploit cloud misconfigurations, supply chain weaknesses, and internal access gaps. For brands running loyalty programs—where customer data spans across demographics, behavior, payments, and preferences—the stakes are even higher.

To maintain trust, loyalty programs must go beyond compliance. They must champion consent-first engagement, end-to-end data protection, and privacy-by-design principles at every touchpoint.

Data Privacy Laws: The 2025 Landscape

Two of the most influential privacy laws remain Europe’s General Data Protection Regulation (GDPR) and California’s Consumer Privacy Rights Act (CPRA). While GDPR continues to operate from a ‘rights-based’ framework—where individuals own and control their data—the U.S. has been evolving its stance.

In 2023, the CPRA came into force, strengthening protections for Sensitive Personal Information (SPI) and adding new rights like:

• The right to correction 
• The right to limit SPI use 
• The right to data portability 
• Clearer opt-in and opt-out mechanisms 

More recently, countries like India (Digital Personal Data Protection Act, 2023), Brazil (LGPD), and China (PIPL) have introduced comprehensive privacy frameworks, while the EU AI Act, coming into effect in 2025, will govern how brands use AI in customer engagement.

A crucial aspect of these regulations is data localization. For example, GDPR mandates that EU citizens’ data must be stored within EU borders—making cloud hosting, data residency, and sovereignty key considerations for global loyalty programs.

In short: It doesn’t matter where your brand operates—what matters is where your customers are.

Apple, Google & the Shift to Customer Data Control

Privacy isn’t just a legal mandate; it’s becoming a core part of platform design.

Apple:

Since 2022, Apple has led with its App Tracking Transparency feature, forcing apps to seek user permission before collecting behavioral data. In 2025, Apple continues to expand Advanced Data Protection, which now offers end-to-end encryption across iCloud and iMessage, even in the face of government requests.

Google:

Google, too, is rolling out its Privacy Sandbox, eliminating third-party cookies and promoting safer, on-device alternatives for targeting. Its 2025 app policy mandates that all apps:

• Provide easy-to-find deletion options 
• Allow users to delete their data permanently 
• Clearly disclose data retention practices 

Together, Apple and Google are signaling a world where customers—not companies—control their personal data. Loyalty programs must adapt accordingly, ensuring personalization doesn’t come at the cost of privacy.

Loyalty Program Data Best Practices in 2025

Loyalty programs can track hundreds of data points per member—purchase history, payment behavior, channel usage, preferences, and more. Here’s how to ensure this powerful data remains an asset, not a liability:

1. Treat Customer Data Like Inventory

Ask yourself:

• Why is this data needed? 
• How will it be used? 
• Who will access it? 
• What is the shelf life of this data? 

Establish protocols that mirror inventory management—acquisition, storage, access control, and safe disposal.

2. Prioritize Data Minimization

Only collect what is necessary. Limit storage duration and perform frequent data audits to reduce your sensitive data footprint. This not only reduces breach risk but also streamlines compliance efforts.

3. Encrypt & Pseudonymize Sensitive Data

Follow GDPR-aligned practices such as pseudonymization, where identifiers like names are replaced with randomized strings. Newer techniques in 2025 also include tokenization, data masking, and federated identity models that reduce risk without limiting personalization.

4. Make Privacy Policies Transparent and Actionable

Your data privacy policy should:

• Clearly define what’s collected and how it’s used 
• List third-party data access 
• Be easy to understand and updated regularly 
• Offer real-time access and consent management for customers 

Privacy as a Competitive Advantage

Treating privacy as a business enabler—not a compliance checklist—can unlock meaningful ROI.

• Cisco’s 2023 Data Privacy Benchmark Study showed that organizations earn $3.40 in return for every $1 spent on privacy. 
• Salesforce reports that 84% of consumers stay loyal to brands with strong data protection policies. 
• The depreciation of third-party cookies makes first-party and zero-party data collected through loyalty programs more valuable than ever. 

AI, Privacy & the Loyalty Equation

As Generative AI powers loyalty use cases—from automated journey design to personalized offers—data privacy takes on new dimensions. Ethical AI governance, synthetic data use, and transparent model training will be the next frontier.

Brands must ensure their AI engines don’t just optimize for performance, but respect data boundaries. This is where privacy-first loyalty programs can lead—by showing how AI and consent can co-exist.

Why Loyalty Programs Are the Future of Engagement

In a world where personalization is expected and data sensitivity is rising, loyalty programs stand out as:

• Opt-in by design 
• Built on permissioned data 
• Structured to support clear value exchange 

They help customers feel valued, not violated. And they allow brands to develop long-term emotional loyalty through transparent, trusted engagement.

Capillary: Your Partner in Privacy-First Loyalty

With over 400 brands across 35+ countries and 7 billion+ transactions annually, Capillary Technologies powers some of the world’s most complex and secure loyalty ecosystems.

From Data Discovery and Classification to Data Loss Prevention (DLP) and AI Ethics, Capillary’s privacy-first infrastructure ensures you can scale personalization without compromising on trust.

At Capillary, we believe respecting customer data isn’t just ethical—it’s strategic. And the most successful loyalty programs of the future will be the most secure ones.

If you’re navigating the complexities of global data compliance or want to build a loyalty program that’s ready for the privacy-first era, let’s talk.

Share

Manan Kashyap is a technology writer and social media consultant who loves to play the flute. After his MBA, Manan worked with Bajaj for five years after which he pursued his journey as a freelance writer with a focus on B2B SaaS.