The industrial revolution, the rise of the internet, and now the era of artificial intelligence (AI) – if one thing is certain, it is that the business world will always adapt in order to capitalize on the most efficient processes possible.

In the context of the recent AI boom, Generative AI is taking organizations to new realms of efficiency, innovation, and productivity. For instance, organizations can now hyper-personalize customer experiences and identify critical business trends at record speeds.

However, the data required to produce such game-changing outputs is often highly sensitive, valuable, and confidential. For organizations utilizing AI tools, if their data is unknowingly passed to third or even fourth parties, the ramifications could not only undermine client trust, but also erode their competitiveness.

Infolocataphobia: is your data safe?

Undoubtedly, the business world has entered an era of AI – a period defined by organizations that not only capitalize on its countless benefits but also risk misusing them. Notably, incidents of AI providers misleading clients on how their data is used are occurring with increasing regularity. For example, OpenAI was recently fined €15 million ($17.48m) for deceptively collecting personal data for training processes.

Such high-profile breaches in trust are raising alarm bells amongst businesses, with concerns growing that AI organizations are acting in a deceitful manner by design. Potential clients are rethinking AI use; they are reluctant to share personal information with AI providers. In fact, 58 percent of AI decision makers report that a lack of trust is significantly reducing the potential and willingness for AI investment within an organization. Infolocataphobia – a fear of not knowing where your data resides – albeit a made-up word, is sweeping the nation.

This leaves AI providers with a crucial question: how can they rebuild the eroding trust created around AI and data?

Rebuilding trust with data residency and transparency

Whether in a business or personal environment, the first step to rebuilding trust is honesty. In the context of an AI provider, this translates to transparency – whether in policy or data residency.

Showing who data is shared with or what it is being used for, even if the client disagrees with the policy, informs them before they entrust AI applications with their valuable information.

Similarly, clarity in data residency – the physical or geographical location of where data is stored and or processed – eliminates the ambiguity and guesswork associated with AI. The fear of the unknown is a real issue. Despite this, many organizations do not have clear visibility of how their data is handled once it’s inputted into AI systems. If clients are shown behind the curtain and some wider understanding is established on where their data is and what it is used for, the fear of the unknown is diminished.

Along with rebuilding trust, a combination of transparency and residency also helps put providers in a stronger position from a compliance perspective. The highly anticipated Data (Use and Access) Bill is looking to make disclosure of data sources utilized by AI a mandatory requirement.

By perfecting these practices before such legislation comes into force, providers can put themselves in a strong position ahead of any other upcoming policy developments.

Indeed, with these practices, clients will build trust that their data is safe from the threat of deceptive practices. However, providers must also establish a trust that this data is safe from other threats too.

Safeguarding data

Transparency helps build trust between organizations and their clients; however, it alone won’t maintain it – cybersecurity has a crucial role to play too. According to Delinea’s ‘2025 Ransomware Report’, the three main causes of cyberattacks reside in outdated IT infrastructure, underinvestment in cyber security, and the possession of valuable data.  

AI providers must revamp their security systems to show clients that unauthorized access to their data is not an option. This includes multiple security measures including multi-factor authentication (MFA) to prevent unauthorized access to vital customer databases, and regularly updating and patching security systems, so threat actors cannot identify and exploit potential vulnerabilities.

Of course, organizations want to utilize the unrivalled abilities of AI so they can continue to improve their business performance. Nevertheless, if they cannot trust these providers to keep their data safe, regardless of how transparent it is, AI use will diminish.

A safer world of AI

Overall, as the capabilities of AI evolve and become more integral to everyday business operations, the responsibilities of AI providers rise simultaneously. By neglecting their duties to keep their customers’ data safe – whether from malpractice or external threat actors – a vital element of trust will be broken between the two parties.

Through enhancing data residency and transparency, AI providers can show clients, both existing and prospective, they are serious about operating to the utmost ethical standards. What’s more, if these organizations enhance their security protocols, it will highlight that data protection is deeply ingrained within every aspect of their operations.