Balancing Fidelity, Privacy, and Bias: The Synthetic Data Dilemma
In a secure computing environment somewhere in Northern Europe, a machine learning team faces a problem that would have seemed absurd a decade ago. They possess a dataset of 50 million user interactions, the kind of treasure trove that could train world-class recommendation systems. The catch? Privacy regulations mean they cannot actually look at most of it. Redacted fields, anonymised identifiers, and entire columns blanked out in the name of GDPR compliance have transformed their data asset into something resembling a heavily censored novel. The plot exists somewhere beneath the redactions, but the crucial details are missing.
This scenario plays out daily across technology companies, healthcare organisations, and financial institutions worldwide. The promise of artificial intelligence depends on data, but the data that matters most is precisely the data that privacy laws, ethical considerations, and practical constraints make hardest to access. Enter synthetic data generation, a field that has matured from academic curiosity to industrial necessity, with estimates indicating that 60 percent of AI projects now incorporate synthetic elements. The global synthetic data market expanded from approximately USD 290 million in 2023 and is projected to reach USD 3.79 billion by 2032, representing a 33 percent compound annual growth rate.
The question confronting every team working with sparse or redacted production data is deceptively simple: how do you create artificial datasets that faithfully represent the statistical properties of your original data without introducing biases that could undermine your models downstream? And how do you validate that your synthetic data actually serves its intended purpose?
Fidelity Versus Privacy at the Heart of Synthetic Data
Synthetic data generation exists in perpetual tension between two competing objectives. On one side sits fidelity, the degree to which artificial data mirrors the statistical distributions, correlations, and patterns present in the original. On the other sits privacy, the assurance that the synthetic dataset cannot be used to re-identify individuals or reveal sensitive information from the source. Research published across multiple venues confirms what practitioners have long suspected: any method to generate synthetic data faces an inherent tension between imitating the statistical distributions in real data and ensuring privacy, leading to a trade-off between usefulness and privacy.
This trade-off becomes particularly acute when dealing with sparse or redacted data. Missing values are not randomly distributed across most real-world datasets. In healthcare records, sensitive diagnoses may be systematically redacted. In financial data, high-value transactions might be obscured. In user-generated content, the most interesting patterns often appear in precisely the data points that privacy regulations require organisations to suppress. Generating synthetic data that accurately represents these patterns without inadvertently learning to reproduce the very information that was meant to remain hidden requires careful navigation of competing constraints.
The challenge intensifies further when considering short-form user content, the tweets, product reviews, chat messages, and search queries that comprise much of the internet's valuable signal. These texts are inherently sparse: individual documents contain limited information, context is often missing, and the patterns that matter emerge only at aggregate scale. Traditional approaches to data augmentation struggle with such content because the distinguishing features of genuine user expression are precisely what makes it difficult to synthesise convincingly.
Understanding this fundamental tension is essential for any team attempting to substitute or augment production data with synthetic alternatives. The goal is not to eliminate the trade-off but rather to navigate it thoughtfully, making explicit choices about which properties matter most for a given use case and accepting the constraints that follow from those choices.
Three Approaches to Synthetic Generation
The landscape of synthetic data generation has consolidated around three primary approaches, each with distinct strengths and limitations that make them suitable for different contexts and content types.
Generative Adversarial Networks
Generative adversarial networks, or GANs, pioneered the modern era of synthetic data generation through an elegant competitive framework. Two neural networks, a generator and a discriminator, engage in an adversarial game. The generator attempts to create synthetic data that appears authentic, while the discriminator attempts to distinguish real from fake. Through iterative training, both networks improve, ideally resulting in a generator capable of producing synthetic data indistinguishable from the original.
For tabular data, specialised variants like CTGAN and TVAE have become workhorses of enterprise synthetic data pipelines. CTGAN was designed specifically to handle the mixed data types and non-Gaussian distributions common in real-world tabular datasets, while TVAE applies variational autoencoder principles to the same problem. Research published in 2024 demonstrates that TVAE stands out for its high utility across all datasets, even for high-dimensional data, though it incurs higher privacy risks. The same studies reveal that TVAE and CTGAN models were employed for various datasets, with hyperparameter tuning conducted for each based on dataset size.
Yet GANs carry significant limitations. Mode collapse, a failure mode where the generator produces outputs that are less diverse than expected, remains a persistent challenge. When mode collapse occurs, the generator learns to produce only a narrow subset of possible outputs, effectively ignoring large portions of the data distribution it should be modelling. A landmark 2024 paper published in IEEE Transactions on Pattern Analysis and Machine Intelligence by researchers from the University of Science and Technology of China introduced the Dynamic GAN framework specifically to detect and resolve mode collapse by comparing generator output to preset diversity thresholds. The DynGAN framework helps ensure synthetic data has the same diversity as the real-world information it is trying to replicate.
For short-form text content specifically, GANs face additional hurdles. Discrete token generation does not mesh naturally with the continuous gradient signals that GAN training requires. Research confirms that GANs face issues with mode collapse and applicability toward generating categorical and binary data, limitations that extend naturally to the discrete token sequences that comprise text.
Large Language Model Augmentation
The emergence of large language models has fundamentally altered the synthetic data landscape, particularly for text-based applications. Unlike GANs, which must be trained from scratch on domain-specific data, LLMs arrive pre-trained on massive corpora and can be prompted or fine-tuned to generate domain-appropriate synthetic content. This approach reduces computational overhead and eliminates the need for large reference datasets during training.
Research from 2024 confirms that LLMs outperform CTGAN by generating synthetic data that more closely matches real data distributions, as evidenced by lower Wasserstein distances. LLMs also generally provide better predictive performance compared to CTGAN, with higher F1 and R-squared scores. Crucially for resource-constrained teams, the use of LLMs for synthetic data generation may offer an accessible alternative to GANs and VAEs, reducing the need for specialised knowledge and computational resources.
For short-form content specifically, LLM-based augmentation shows particular promise. A 2024 study published in the journal Natural Language Engineering demonstrated improvements of up to 15.53 percent accuracy gains within constructed low-data regimes compared to no augmentation baselines, with major improvements in real-world low-data tasks of up to 4.84 F1 score improvement. Research on ChatGPT-generated synthetic data found that the new data consistently enhanced model classification results, though crafting prompts carefully is crucial for achieving high-quality outputs.
However, LLM-generated text carries its own biases, reflecting the training data and design choices embedded in foundation models. Synthetic data generated from LLMs is usually noisy and has a different distribution compared with raw data, which can hamper training performance. Mixing synthetic data with real data is a common practice to alleviate distribution mismatches, with a core of real examples anchoring the model in reality while the synthetic portion provides augmentation.
The rise of LLM-based augmentation has also democratised access to synthetic data generation. Previously, teams needed substantial machine learning expertise to configure and train GANs effectively. Now, prompt engineering offers a more accessible entry point, though it brings its own challenges in ensuring consistency and controlling for embedded biases.
Rule-Based Synthesis
At the opposite end of the sophistication spectrum, rule-based systems create synthetic data by complying with established rules and logical constructs that mimic real data features. These systems are deterministic, meaning that the same rules consistently yield the same results, making them extremely predictable and reproducible.
For organisations prioritising compliance, auditability, and interpretability over raw performance, rule-based approaches offer significant advantages. When a regulator asks how synthetic data was generated, pointing to explicit transformation rules proves far easier than explaining the learned weights of a neural network. Rule-based synthesis excels in scenarios where domain expertise can be encoded directly.
The limitations are equally clear. Simple rule-based augmentations often do not introduce truly new linguistic patterns or semantic variations. For short-form text specifically, rule-based approaches like synonym replacement and random insertion produce variants that technical evaluation might accept but that lack the naturalness of genuine user expression.
Measuring Fidelity Across Multiple Dimensions
The question of how to measure synthetic data fidelity has spawned an entire subfield of evaluation methodology. Unlike traditional machine learning metrics that assess performance on specific tasks, synthetic data evaluation must capture the degree to which artificial data preserves the statistical properties of its source while remaining sufficiently different to provide genuine augmentation value.
Statistical Similarity Metrics
The most straightforward approach compares the statistical distributions of real and synthetic data across multiple dimensions. The Wasserstein distance, also known as the Earth Mover's distance, has emerged as a preferred metric for continuous variables because it does not suffer from oversensitivity to minor distribution shifts. Research confirms that the Wasserstein distance is proposed as the most effective synthetic indicator of distribution variability, offering a more concise and immediate assessment compared to an extensive array of statistical metrics.
For categorical variables, the Jensen-Shannon divergence and total variation distance provide analogous measures of distributional similarity. A comprehensive evaluation framework consolidates metrics and privacy risk measures across three key categories: fidelity, utility, and privacy, while also incorporating a fidelity-utility trade-off metric.
However, these univariate and bivariate metrics carry significant limitations. Research cautions that Jensen-Shannon divergence and Wasserstein distance, similar to KL-divergence, do not account for inter-column statistics. Synthetic data might perfectly match marginal distributions while completely failing to capture the correlations and dependencies that make real data valuable for training purposes.
Detection-Based Evaluation
An alternative paradigm treats fidelity as an adversarial game: can a classifier distinguish real from synthetic data? The basic idea of detection-based fidelity is to learn a model that can discriminate between real and synthetic data. If the model can achieve better-than-random predictive performance, this indicates that there are some patterns that identify synthetic data.
Research suggests that while logistic detection implies a lenient evaluation of state-of-the-art methods, tree-based ensemble models offer a better alternative for tabular data discrimination. For short-form text content, language model perplexity provides an analogous signal.
Downstream Task Performance
The most pragmatic approach to fidelity evaluation sidesteps abstract statistical measures entirely, instead asking whether synthetic data serves its intended purpose. The Train-Synthetic-Test-Real evaluation, commonly known as TSTR, has become a standard methodology for validating synthetic data quality by evaluating its performance on a downstream machine learning task.
The TSTR framework compares the performance of models trained on synthetic data against those trained on original data when both are evaluated against a common holdout test set from the original dataset. Research confirms that for machine learning applications, models trained on high-quality synthetic data typically achieve performance within 5 to 15 percent of models trained on real data. Some studies report that synthetic data holds 95 percent of the prediction performance of real data.
A 2025 study published in Nature Scientific Reports demonstrated that the TSTR protocol showed synthetic data were highly reliable, with notable alignment between distributions of real and synthetic data.
Distributional Bias That Synthetic Data Creates
If synthetic data faithfully reproduces the statistical properties of original data, it will also faithfully reproduce any biases present. This presents teams with an uncomfortable choice: generate accurate synthetic data that perpetuates historical biases, or attempt to correct biases during generation and risk introducing new distributional distortions.
Research confirms that generating data is one of several strategies to mitigate bias. While other techniques tend to reduce or process datasets to ensure fairness, which may result in information loss, synthetic data generation helps preserve the data distribution and add statistically similar data samples to reduce bias. However, this framing assumes the original distribution is desirable. In many real-world scenarios, the original data reflects historical discrimination, sampling biases, or structural inequalities that machine learning systems should not perpetuate.
Statistical methods for detecting bias include disparate impact assessment, which evaluates whether a model negatively impacts certain groups; equal opportunity difference, which measures the difference in positive outcome rates between groups; and statistical parity difference. Evaluating synthetic datasets against fairness metrics such as demographic parity, equal opportunity, and disparate impact can help identify and correct biases.
The challenge of bias correction in synthetic data generation has spawned specialised techniques. A common approach involves generating synthetic data for the minority group and then training classification models with both observed and synthetic data. However, since synthetic data depends on observed data and fails to replicate the original data distribution accurately, prediction accuracy is reduced when synthetic data is naively treated as true data.
Advanced bias correction methodologies effectively estimate and adjust for the discrepancy between the synthetic distribution and the true distribution. Mitigating biases may involve resampling, reweighting, and adversarial debiasing techniques. Yet research acknowledges there is a noticeable lack of comprehensive validation techniques that can ensure synthetic data maintain complexity and integrity while avoiding bias.
Privacy Risks That Synthetic Data Does Not Eliminate
A persistent misconception treats synthetic data as inherently private, since the generated records do not correspond to real individuals. Research emphatically contradicts this assumption. Membership inference attacks, whereby an adversary infers if data from certain target individuals were relied upon by the synthetic data generation process, can be substantially enhanced through state-of-the-art machine learning frameworks.
Studies demonstrate that outliers are at risk of membership inference attacks. Research from the Office of the Privacy Commissioner of Canada notes that synthetic data does not fully protect against membership inference attacks, with records having attribute values outside the 95th percentile remaining at high risk.
The stakes extend beyond technical concerns. If a dataset is specific to individuals with dementia or HIV, then the mere fact that an individual's record was included would reveal personal information about them. Synthetic data cannot fully obscure this membership signal when the generation process has learned patterns specific to particular individuals.
Evaluation metrics have emerged to quantify these risks. The identifiability score indicates the likelihood of malicious actors using information in synthetic data to re-identify individuals in real data. The membership inference score measures the risk that an attack can determine whether a particular record was used to train the synthesiser.
Mitigation strategies include applying de-identification techniques such as generalisation or suppression to source data. Differential privacy can be applied during training to protect against membership inference attacks.
The Private Evolution framework, adopted by major technology companies including Microsoft and Apple, uses foundation model APIs to create synthetic data with differential privacy guarantees. Microsoft's approach generates differentially private synthetic data without requiring ML model training. Apple creates synthetic data representative of aggregate trends in real user data without collecting actual emails or text from devices.
However, privacy protection comes at a cost. For generative models, differential privacy can lead to a significant reduction in the utility of resulting data. Research confirms that simpler models generally achieved better fidelity and utility, while the addition of differential privacy often reduced both fidelity and utility.
Validation Steps for Downstream Model Reliability
The quality of synthetic data directly impacts downstream AI applications, making validation not just beneficial but essential. Without proper validation, AI systems trained on synthetic data may learn misleading patterns, produce unreliable predictions, or fail entirely when deployed.
A comprehensive validation protocol proceeds through multiple stages, each addressing distinct aspects of synthetic data quality and fitness for purpose.
Statistical Validation
The first validation stage confirms that synthetic data preserves the statistical properties required for downstream tasks. This includes univariate distribution comparisons using Wasserstein distance for continuous variables and Jensen-Shannon divergence for categorical variables; bivariate correlation analysis comparing correlation matrices; and higher-order dependency checks that examine whether complex relationships survive the generation process.
The SynthEval framework provides an open-source evaluation tool that leverages statistical and machine learning techniques to comprehensively evaluate synthetic data fidelity and privacy-preserving integrity.
Utility Validation Through TSTR
The Train-Synthetic-Test-Real protocol provides the definitive test of whether synthetic data serves its intended purpose. Practitioners should establish baseline performance using models trained on original data, then measure degradation when switching to synthetic training data. Research suggests performance within 5 to 15 percent of real-data baselines indicates high-quality synthetic data.
Privacy Validation
Before deploying synthetic data in production, teams must verify that privacy guarantees hold in practice. This includes running membership inference attacks against the synthetic dataset to identify vulnerable records; calculating identifiability scores; and verifying that differential privacy budgets were correctly implemented if applicable.
Research on nearly tight black-box auditing of differentially private machine learning, presented at NeurIPS 2024, demonstrates that rigorous auditing can detect bugs and identify privacy violations in real-world implementations.
Bias Validation
Teams must explicitly verify that synthetic data does not amplify biases present in original data or introduce new biases. This includes comparing demographic representation between real and synthetic data; evaluating fairness metrics across protected groups; and testing downstream models for disparate impact before deployment.
Production Monitoring
Validation does not end at deployment. Production systems should track model performance over time to detect distribution drift; monitor synthetic data generation pipelines for mode collapse or quality degradation; and regularly re-audit privacy guarantees as new attack techniques emerge.
Industry Platforms and Enterprise Adoption
The maturation of synthetic data technology has spawned a competitive landscape of enterprise platforms.
MOSTLY AI has evolved to become one of the most reliable synthetic data platforms globally. In 2025, the company is generally considered the go-to solution for synthetic data that not only appears realistic but also behaves that way. MOSTLY AI offers enterprise-grade synthetic data with strong privacy guarantees for financial services and healthcare sectors.
Gretel provides a synthetic data platform for AI applications across various industries, generating synthetic datasets while maintaining privacy. In March 2025, Gretel was acquired by NVIDIA, signalling the strategic importance of synthetic data to the broader AI infrastructure stack.
The Synthetic Data Vault, or SDV, offers an open-source Python framework for generating synthetic data that mimics real-world tabular data. Comparative studies reveal significant performance differences: accuracy of data generated with SDV was 52.7 percent while MOSTLY AI achieved 97.8 percent for the same operation.
Enterprise adoption reflects broader AI investment trends. According to a Menlo Ventures report, AI spending in 2024 reached USD 13.8 billion, over six times more than the previous year. However, 21 percent of AI pilots failed due to privacy concerns. With breach costs at a record USD 4.88 million in 2024, poor data practices have become expensive. Gartner research predicts that by 2026, 75 percent of businesses will use generative AI to create synthetic customer data.
Healthcare and Finance Deployments
Synthetic data has found particular traction in heavily regulated industries where privacy constraints collide with the need for large-scale machine learning.
In healthcare, a comprehensive review identified seven use cases for synthetic data: simulation and prediction research; hypothesis, methods, and algorithm testing; epidemiology and public health research; and health IT development. Digital health companies leverage synthetic data for building and testing offerings in non-HIPAA environments. Research demonstrates that diagnostic prediction models trained on synthetic data achieve 90 percent of the accuracy compared to models trained on real data.
The European Commission has funded the SYNTHIA project to facilitate responsible use of synthetic data in healthcare applications.
In finance, the sector leverages synthetic data for fraud detection, risk assessment, and algorithmic trading, allowing financial institutions to develop more accurate and reliable models without compromising customer data. Banks and fintech companies generate synthetic transaction data to test fraud detection systems without compromising customer privacy.
Operational Integration and Organisational Change
Deploying synthetic data generation requires more than selecting the right mathematical technique. It demands fundamental changes to how organisations structure their analytics pipelines and governance processes. Gartner predicts that by 2025, 60 percent of large organisations will use at least one privacy-enhancing computation technique in analytics, business intelligence, or cloud computing.
Synthetic data platforms typically must integrate with identity and access management solutions, data preparation tooling, and key management technologies. These integrations introduce overheads that should be assessed early in the decision-making process.
Performance considerations vary significantly across technologies. Generative adversarial networks require substantial computational resources for training. LLM-based approaches demand access to foundation model APIs or significant compute for local deployment. Differential privacy mechanisms add computational overhead during generation.
Implementing synthetic data generation requires in-depth technical expertise. Specialised skills such as cryptography expertise can be hard to find. The complexity extends to procurement processes, necessitating collaboration between data governance, legal, and IT teams.
Policy changes accompany technical implementation. Organisations must establish clear governance frameworks that define who can access which synthetic datasets, how privacy budgets are allocated and tracked, and what audit trails must be maintained.
When Synthetic Data Fails
Synthetic data is not a panacea. The field faces ongoing challenges in ensuring data quality and preventing model collapse, where AI systems degrade from training on synthetic outputs. A 2023 Nature article warned that AI's potential to accelerate development needs a reality check, cautioning that the field risks overpromising and underdelivering.
Machine learning systems are only as good as their training data, and if original datasets contain errors, biases, or gaps, synthetic generation will perpetuate and potentially amplify these limitations.
Deep learning models make predictions through layers of mathematical transformations that can be difficult or impossible to interpret mechanistically. This opacity creates challenges for troubleshooting when synthetic data fails to serve its purpose and for satisfying compliance requirements that demand transparency about data provenance.
Integration challenges between data science teams and traditional organisational functions also create friction. Synthetic data generation requires deep domain expertise. Organisations must successfully integrate computational and operational teams, aligning incentives and workflows.
Building a Robust Synthetic Data Practice
For teams confronting sparse or redacted production data, building a robust synthetic data practice requires systematic attention to multiple concerns simultaneously.
Start with clear objectives. Different use cases demand different trade-offs between fidelity, privacy, and computational cost. Testing and development environments may tolerate lower fidelity if privacy is paramount. Training production models requires higher fidelity even at greater privacy risk.
Invest in evaluation infrastructure. The TSTR framework should become standard practice for any synthetic data deployment. Establish baseline model performance on original data, then measure degradation systematically when switching to synthetic training data. Build privacy auditing capabilities that can detect membership inference vulnerabilities before deployment.
Treat bias as a first-class concern. Evaluate fairness metrics before and after synthetic data generation. Build pipelines that flag demographic disparities automatically. Consider whether the goal is to reproduce original distributions faithfully, which may perpetuate historical biases, or to correct biases during generation.
Plan for production monitoring. Synthetic data quality can degrade as source data evolves and as generation pipelines develop subtle bugs. Build observability into synthetic data systems just as production ML models require monitoring for drift and degradation.
Build organisational capability. Synthetic data generation sits at the intersection of machine learning, privacy engineering, and domain expertise. Few individuals possess all three skill sets. Build cross-functional teams that can navigate technical trade-offs while remaining grounded in application requirements.
The trajectory of synthetic data points toward increasing importance rather than diminishing returns. Gartner projects that by 2030, synthetic data will fully surpass real data in AI models. Whether this prediction proves accurate, the fundamental pressures driving synthetic data adoption show no signs of abating. Privacy regulations continue to tighten. Data scarcity in specialised domains persists. Computational techniques continue to improve.
For teams working with sparse or redacted production data, synthetic generation offers a path forward that balances privacy preservation with machine learning utility. The path is not without hazards: distributional biases, privacy vulnerabilities, and quality degradation all demand attention. But with systematic validation, continuous monitoring, and clear-eyed assessment of trade-offs, synthetic data can bridge the gap between the data organisations need and the data regulations allow them to use.
The future belongs to teams that master not just synthetic data generation, but the harder challenge of validating that their artificial datasets serve their intended purposes without introducing the harmful biases that could undermine everything they build downstream.
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Tim Green UK-based Systems Theorist & Independent Technology Writer
Tim explores the intersections of artificial intelligence, decentralised cognition, and posthuman ethics. His work, published at smarterarticles.co.uk, challenges dominant narratives of technological progress while proposing interdisciplinary frameworks for collective intelligence and digital stewardship.
His writing has been featured on Ground News and shared by independent researchers across both academic and technological communities.
ORCID: 0009-0002-0156-9795 Email: tim@smarterarticles.co.uk