DEFINITION of 'Data Anonymization'

A data privacy technique that seeks to protect private or sensitive data by deleting or encrypting personally identifiable information from a database. Data anonymization is done for the purpose of protecting an individual’s or company’s private activities while maintaining the integrity of the data gathered and shared.

Also known as Data Obfuscation, Data Masking, and Data De-Identification.

BREAKING DOWN 'Data Anonymization'

Corporations generate, store, and process enormous amounts of sensitive data in the normal course of their business operations. Advancement in technology has thrived because of relevant information found in data that has been generated and shared across various sectors and countries. Financial innovation in technology (FinTech) has made boundless progress in the way financial services are customized to clients, thanks to data that has been shared from sectors such as social media and e-commerce establishments. Data shared between digital media and e-commerce firms has helped both sectors better advertise products on their sites to a specific user or consumer. However, in order for shared data to be useful without compromising the identities of clients compiled in the database, anonymization must be utilized.

Data anonymization is carried out by most industries that deal with sensitive information such as the healthcare, financial, and digital media industries while promoting the integrity of data sharing. Data anonymization reduces the risk of unintended disclosure when sharing data between countries, industries, and even departments within the same company. For example, a hospital sharing confidential data on its patients to a medical research lab or pharmaceutical company would be able to do so ethically if it keeps its patients anonymous. This can be done by removing the names, Social Security Numbers, dates of birth, and addresses of its patients from the shared list while leaving the important components required for medical research like age, ailments, height, weight, gender, race, etc.

Anonymization of data is done in various ways including deletion, encryption, generalization, and a host of others. A company can either delete personally identifiable information (PII) from its data gathered or encrypt this information with a strong passphrase. A business can also decide to generalize the information collected in its database. For example, a table contains the exact gross income earned by 5 CEOs in the retail sector. Let's assume the recorded incomes are $520,000, $230,000, $109,000, $875,000, and $124,000. This information can be generalized into categories like “< $500,000” and “≥ $500,000”. Although, the data is obfuscated, it will still be useful to the user.

Data anonymization whereby classified information is sanitized and masked should be done in such a way that if a breach occurs, the data acquired is useless to the culprits. The need to protect data should be held in high priority in every organization, as classified information that falls into the wrong hands can be misused, intentionally or unintentionally. Lack of sensitivity when handling sensitive client information can come at a great cost to businesses due to regulatory authorities cracking down on gross negligence. Legal and compliance requirements like PCI DSS (Payment Card Industry Data Security Standard) impose hefty fines on financial institutions in the event of a credit card breach. PIPEDA, a Canadian Law, governs the disclosure and use of personal information by corporations. There are other multiple regulatory bodies that have been formed to monitor an organization’s use or misuse of private data.

Decoding anonymized data is possible through a process known as De-Anonymization (or Re-Identification). Due to the fact that anonymized data can be decoded and unraveled, critics believe anonymization provides a false sense of security.

  1. De-Anonymization

    De-anonymization is a reverse data mining technique that re-identifies ...
  2. Anonymous (Internet Group)

    Anonymous is most widely known for committing cyber-attacks to ...
  3. Silk Road

    A digital platform that was popular for hosting money laundering ...
  4. Data Protection Officer (DPO)

    A data protection officer (DPO) is a position within a corporation ...
  5. Data Warehousing

    Data warehousing is the electronic storage of a large amount ...
  6. Doxing

    Doxing is the intentional act of publishing someone’s private, ...
Related Articles
  1. Tech

    The Rise of 'Private' Cryptocurrencies

    Dash, monero, and other cryptocurrencies with a focus on user privacy are becoming increasingly popular.
  2. Tech

    How Blockchain Tech Can Fight Data Breaches

    In the wake of major data breaches, blockchain's ability to anonymize users is touted as a possible solution to rampant identity theft.
  3. Personal Finance

    Common Interview Questions for Data Integrity Analysts

    Prepare for a data integrity analyst job interview by identifying some of the key questions commonly asked and developing winning responses.
  4. Investing

    Digital Currencies Can't Be Anonymous, Says EU Parliament

    In a recent report, the EUP called virtual currencies a "marginal phenomenon," and one that "cannot be anonymous."
  5. Tech

    How Big Data Has Changed Healthcare

    Like many other industries, healthcare has adapted to data analytics not only for its financial returns but also improving patient’s quality of life.
  6. Tech

    Predictive Analytics Drives Return for Investors

    A new industry of predictive analysis has developed to make sense of big data and give investors real-time buy and sell recommendations based on the patterns forming in the data long before traditional ...
  7. Tech

    Prevent Employees From Hacking You Computer System

    Cyber security attacks from a current or ex-employee can cause a lot of pain. Here is how to avoid such attacks.
  8. Tech

    Hackers Steal Medical Records from Quest Diagnostics (DGX)

    Quest Diagnostics is the latest company to disclose it was the victim of a hack, putting information on around 34,000 individuals at risk.
  9. Investing

    Google Not Facebook Collects More Data On Users

    It's Google, not Facebook, that users should worry about when it comes to data harvesting.
  10. Tech

    Cryptocurrencies Could Get Their Own Central Bank

    The Bank for International Settlements considers having central banks issue their own crypto-money.
  1. What is the most important type of data used in business analytics?

    Consider what makes data useful in business analytics, and why companies should search for the types of data that provide ... Read Answer >>
  2. What are some examples of ways that sensitivity analysis can be used?

    Understand the concept of sensitivity analysis and learn about the wide variety of disciplines to which it can be applied. Read Answer >>
  3. What impact does a higher non-farm payroll have on the forex market?

    The employment report, released by the Bureau of Labor Statistics, is an economic indicator that contains data on the employment ... Read Answer >>
  4. Where can I find fiscal year data for publicly traded corporations?

    Access fiscal year data for publicly traded corporations that is required by the government to be readily available to the ... Read Answer >>
  5. Is a private company required to show financial information?

    Understand whether a private company is required to disclose financial information to the public. Learn what is required ... Read Answer >>
Hot Definitions
  1. Gross Margin

    A company's total sales revenue minus its cost of goods sold, divided by the total sales revenue, expressed as a percentage. ...
  2. Inflation

    Inflation is the rate at which prices for goods and services is rising and the worth of currency is dropping.
  3. Discount Rate

    Discount rate is the interest rate charged to commercial banks and other depository institutions for loans received from ...
  4. Economies of Scale

    Economies of scale refer to reduced costs per unit that arise from increased total output of a product. For example, a larger ...
  5. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  6. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
Trading Center