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Data Protection Law: Enhancing The Ecosystem

The chatter on data privacy is slowly growing into a heated discourse as technologies at the forefront of innovation are pitted against the fundamental right of individuals to protect their privacy. Harnessing data lies at the core of the digital revolution, thus earning it the moniker “oil of the 21st century”. Data and the ability of corporations to leverage data is fuelling economies across the globe and giving rise to differentiated businesses and business models. India’s commercial ecosystem has immensely benefited from this data revolution. India has close to 500 million internet users and these users are aggressively using internet-based services ranging from food delivery to online shopping. The proliferation of e-commerce platforms and the many start-ups that are providing services and goods over the internet are relying heavily on the collection of personal data. At present, the Information Technology Act is the framework available for organisations to integrate data protection within their processes and prospectively, the Data Protection Bill of 2019 (PDPB) will subsume the requirements governing personal data. The Bill proposes controls that include the concept of consent manager wherein individuals may use it to give or withdraw consent to the organisation collecting their data and transparency requirement to provide notices to individuals subjected to data processing activities in addition to conducting data protection impact assessments.

A raging debate around the implementation of data privacy laws is that it will be a drag on innovation. Rather than a threat, such laws should be perceived as enablers. Innovation and privacy are like the two sides of a coin — seemingly on opposite sides but only hold value when together. The key value proposition for a host of e-commerce companies and fintech operating in the financial services space is the ability to harness customer data in order to provide clients with more customised solutions. An attempt to create “wow” moments along the customers’ journey. Data becomes central to understanding a client’s proclivities and accordingly fashioning the desired solutions. However, the concern around data privacy laws strangling innovation is largely unfounded. Data privacy does not mean that corporations and start-ups will not have access to data and will thus not be able to innovate. It only means that there will be more accountability for the data that they collect, process and store. At its core, the concept of privacy also empowers the data owner, that is, the individual. It promotes the individual to have control over how his/her personal data is being collected and/or used. The traditional relationship between a corporation and an individual was skewed in favour of the corporation. Data privacy laws simply level the playing field by empowering the consumer.

Scalable innovation cannot be done without adequate privacy safeguards and data privacy laws have the potential to encourage innovation by enabling an ecosystem where things are done in the right way.

A case in point is the State of California, home to the Silicon Valley and widely considered as the innovation hub of the world. The California Consumer Privacy Act which became the California law in June 2018, is one of the strongest legislation on data privacy in the United States. Technology and e-commerce businesses in the state continue to evolve as they gear up to comply with these new laws. The aim of such laws is to curtail the activities of those who are exploiting data for more than its intended use and put the reins in the hands of the data owner as per her preference — this goes a step beyond consent and lets the individual decide how his data is going to be harnessed.

The question is, “Whom does the data belong to?”

Corporations should consider their role as a custodian of individual’s personal data similar to how banks are custodian of an individual’s money. The money that we deposit in banks cannot be used by the banks as per their whim or requirements. Banks cannot choose to invest our money in the equity market or even open a fixed deposit without our explicit consent. At the same time, they have a duty to protect our money.

Corporations in the digital world have a similar responsibility. As custodians of our personal data, they do not have the authority to leverage our data as per their preferences. They should be held responsible for protecting our data from cyber infringement and misuse. Structured and well-defined laws on data privacy can help preserve the sanctity of data and deter its misuse.

The consumers are clear winners as data privacy laws ensure that they have a say in the way their personal data is being harnessed. Corporations stand to benefit as well. In 2017, India experienced the second-highest number of data breaches across the world (Rs 37 per cent of the overall data breaches). Enterprises face a significant risk of data breach by ‘insiders’, that is, employees or third-party vendors with access to data. The economic and reputational cost of data breaches can be high. Corporations can avoid this by complying with the prevailing data privacy laws and building new systems that allow them to safely explore, validate and analyse data. On the other hand, one must concede that data (personal) may no longer be as easily and freely available as in the past. Businesses need to ensure that their operating environment is enhanced and change the way they deal with an individual’s data. Thus, corporations should strive for a “privacy-enabled environment” and not just a “privacy-compliant environment”. The former can help businesses create a competitive advantage as individuals may prefer them and feel safe to transact and engage with such business.

Far from stifling innovation, privacy requirements and regulations are designed to give an impetus to the data economy and provide organisations with innovative ways to engage with customers, address the mushrooming trust deficit and build a competitive advantage. The successful organisations will be those who can see beyond the regulatory constraint and use it as a catalyst for digital transformation and for creating an enduring competitive advantage.―Business Standard

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