How localization of data will affect firms, consumers

How localization of data will affect firms, consumers

News:

1. RBI directed payment firms to submit fortnightly updates on the progress made on storing data in India.

Payment Firms: Enterprises which handle transactions from digital payment systems to promote cashless mode of money transfer, e.g. by credit and debit cards.

Important Facts:

2. Recently released  draft e-commerce policy and the Srikrishna report talks about data localization.

3. About data localization

• It is the practice of storing data on any device that is physically present within the borders of the country where the data is generated.
• Free flow of digital data is restricted by some governments. Data localization is promoted to protect security across borders. 

4. RBI data localization norms:

• RBI directed all system providers to store the entire data relating to payment systems operated by them in a system only in India.
• This data should include the full end-to-end transaction details/ information collected/ carried/processed as part of the message/payment instruction.
• For the overseas leg of a transaction, the data may be stored in the foreign country.

5. Rationale for the RBI regulation

• Access to data stored by system providers and third-party vendors in the payments ecosystem will ensure better monitoring.

6. Consequences of data localization norms:

• Payment firms have to abide by the laws framed by the government and RBI.
• Global digital payments like Visa, American EXpress, Facebook,Paypal, Mastercard and Google will be impacted.
• Google recently agreed to comply with the RBI’s data localization norms.

7. Arguments for data localization:

• It will help law enforcement agencies to detect crime and  gather evidence for prosecution as accessing information locally is easier than from foreign entities abroad.
• It will  help avoid the vulnerabilities of relying on fibre optic cable network.
• It will  prevent foreign surveillance of critical personal data.

8. Arguments against data localization:

• Splintering the internet by data localization weakens the data security measures globally.
• The Cyber Security Report 2017 reported that businesses in India were most at risk to cyber security attacks.
• Thus, a mandatory border control provision by data localisation may not be the solution to avoiding security breach incidents.
• As foreign governments use sophisticated malware to spy, forcing data storage within the country’s boundaries may not offer it any better protection.
• Huge costs are involved to fulfill  data localisation requirements.

9.. Way forward:

• Robust security measures at par with global industry standards are needed  along with the push towards data localization.