What role does data sharing play in the modern economy?

We take data sharing for granted. It seems faintly comical to think of Cold War films with spies meeting in desolate parks to hand over a file – a hard-copy foolscap file, no less – to the enemy. Telecommunications technology, particularly the internet, has made it possible to share information in volumes and at speeds that would once have been unthinkable.

Together, companies and statutory bodies hold huge amounts of data about each of us. Our whole lives could be pieced together from medical histories, purchasing patterns, financial data and internet browsing records. Storing this information helps organizations provide better service, but there are obvious risks. Private data can be used for fraud, blackmail or simply to pry into people’s lives.

In 1998 the Data Protection Act introduced new restrictions on how people’s data should be stored in the UK. It set out key ‘data protection principles’ specifying, for example, that data must be kept for no longer than necessary and that it should be used in a way that is adequate, relevant and not excessive.

The consequences of not protecting data adequately can be extreme. In August 2015 a London clinic sent a newsletter to around 780 patients receiving treatment for HIV. Rather than using a ‘BCC’ option, the staff member who sent the email entered the addresses directly, meaning everyone on the list could see each others’ full names and email addresses. The example shows how a simple slip can reveal highly sensitive private data, potentially having a huge impact on people’s lives.

The globalization of business brings new challenges for data protection. In October 2015 the European Court of Justice (ECJ) struck down the Safe Harbour agreement which had governed the exchange of data across the Atlantic Ocean for 15 years. In order to enable US businesses to access European markets, Safe Harbour allowed businesses to self-certify that measures had been taken to protect customer data in accordance with EU data protection standards, which are more stringent than those of the US. This bypassed any involvement from national regulators.

The 2013 Edward Snowden revelations showed how US companies allowed the US National Security Agency (NSA) to access private data of foreign citizens and governments. The overturning of the Safe Harbour agreement came in direct response to this, as an Austrian student wanted to find out if Facebook had passed his data to the NSA. The ECJ said the Safe Harbour agreement was not sufficient to protect the student’s privacy and that the relevant national regulator should step in.

As a result of the ECJ’s decision, the estimated 4,400 internet businesses that relied on Safe Harbour, including giants such as Amazon, Facebook and Google, will have to enter separate contractual agreements specifying how they will protect EU citizens’ data. This will make the sharing of data across international boundaries much more complex.

The issue of global data sharing will not be resolved any time soon. The success of the controversial Transatlantic Trade and Investment Partnership (TTIP) which seeks to harmonize trading conditions between the US and EU will require agreement on data sharing standards. The political sensitivity of data has been described as “the new oil” by John Boswell, senior vice president of SAS, a business analytics and software company.

It is clear that there is significant consumer concern about how companies store their data, and who is given access to that data. Businesses will be able to secure an advantage over competitors if they can demonstrate their credentials in protecting customer data. Yet consumers cannot be expected to read through long contracts setting out in detail how their data will be used. In future, a set of industry-wide standards or Kitemarks could be established to provide at-a-glance reassurance of consumer protection.

Until there is a wider consensus on data sharing standards, there will continue to be scandals about bad practice by business. This issue will continue to add to uncertainty and instability in the markets unless businesses can find a way to show they can truly be trusted with our data.