Why Data Protection Is So Important for SaaS

Why Data Protection Is So Important for SaaS

Technological, political, and legal issues impact privacy and data protection these days. Hardware and software need more and more personal information to operate correctly. 

The Internet of Things, for example, opens up a massive breach between technology and legislation. While software and hardware companies make giant leaps, legislation is slow to interact. Designing regulations against data theft and fraud becomes more and more challenging.

The personal information footprint you leave is large. No matter the niche, most companies hold at least some identifiable or sensitive information about you. From health to financial apps, location-based services to web surfing, companies collect it for various reasons.

Data protection is a global issue and acts under accepted international legislation. However, some countries arrange local regulatory bodies that work with privacy laws.

Each territory approaches the issue within the country-specific context. In this sense, political systems and affiliations can mess up policy-making if it doesn’t have a universal basis. While local solutions aren’t necessarily wrong, this fractured approach has been an issue for a long time.

This article discusses a few legislative domains of data protection. It also touches upon the ways new laws influence business operations.

What Is Data Protection?

In some cases, privacy and data protection are used interchangeably. To be more precise, let’s first acknowledge the difference between these two terms.

Privacy is the right to freedom of thought and conscience, as well as the right to protect one’s reputation and family life. In short, it’s the fundamental right to dignity and autonomy. 

It seems a straightforward explanation in simple terms, right? Still, from a legal standpoint, privacy isn’t absolute. The right doesn’t take over if it contradicts national security, public safety, or free expression.

On the other hand, data protection is all about the fair and proper use of personal information. It’s a specific regulated area of privacy in its broader sense. Data protection laws deal with the ways third parties use information about individuals. This concept refers to the methods of information processing (sharing, storing, using, etc.).

Compliance with data protection laws is limited to business and commercial use. It doesn’t include personal accounts, social media activity, and letters. Information used for household, family, or personal purposes doesn’t need to comply.

In short, privacy has a broader connotation. Data protection is a legislative measure within this general concept.

How Universal is Data Protection Law?

Grasping the sheer scope of universal data protection regulations can make you wonder if it’s even possible to adequately write relevant policies. The diversity of organizations, situations, and diplomacies wouldn’t leave you much confidence if you were a policymaker in this field.

There’s no ‘one size fits all’ solution and absolute rules here. Still, technology doesn’t wait, and personal information becomes more and more vulnerable.

Universal data protection regulations are crucial for a few reasons. First of all, the free info transfer across borders helps international trade. It ingrains trust among the players across the globe. 

Another fundamental reason for developing data protection practices is innovation. If users know that companies won’t misuse their private information, they can be more open to unconventional solutions. 

Data Protection in Different Countries

All countries have some common information security standards. Some jurisdictions also adopt local laws and organize regulatory bodies. These authorities follow global practices and are more mobile in reacting to regional developments.

There are existing laws and regulations in different countries. The Privacy Act (Canada), the China Cybersecurity Law, and the Data Protection Act (UK) are a few of the most notable ones.

Besides the existing laws, there are also country authorities that regulate the local scene. National Data Protection Authorities (EU), Federal Commissioner for Data Protection and Freedom of Information (Germany), and Information Commissioner’s Office (ICO, United Kingdom) are some of them.

Key Concepts

DP laws and regulations generally agree on some fundamental concepts and their descriptions. Let’s see what each of these notions encompass and how they act in the SaaS context. 

Personal Data

Personal data is information about an identifiable person. Some people make a mistake, thinking that this category only contains private or anonymous information. It can include sensitive bits like address, credit card, and a social security number. Still, most of this category involves general knowledge like name, family name, and gender. 

Processing 

Processing is what you can do with the data. Collecting, recording, storing, transferring, analyzing, and combining are all processing methods. Data protection laws usually consider information processing and regulate its safety and security. 

Data Subject 

The data subject is an individual whose details are collected and processed. 

Controller 

The controller is the party that processes information. This can be an organization or a person, say, an owner of a company. The controller handles all compliance issues. 

Processor 

The data processor is a third party that acts on behalf of the controller and according to its instructions. Although more limited, this party also has binding legal obligations around the data. 

Now that we know the definitions let’s take a SaaS company and see how these terms apply.

  • The business is the controller who processes the client data
  • The client is the data subject
  • A third-party financial application within the software is the processor

Controllers need to follow procedures and regulations to make sure processing adheres to international and local laws. Their first aim should be to establish trust between the data subjects and the company. 

GDPR

General Data Protection Regulation (GDPR) is a comprehensive universal law. It deals with organizations in the European Union (EU) and European Economic Area (EEA).

In 2016, this regulation replaced the Data Protection Directive. The latter had little or no control over digital data processing and the internet. In GDPR, technological developments hold a central role. The EU Digital Single Market strategy, as a part of the ‘ePrivacy Regulation,’ handles all tech-related issues.

During the two years between its adoption and implementation, all controllers had to make sure that their practices follow the regulation. GDPR has since influenced many international companies and acted as a new guideline for privacy standards. 

LGPD

Before Lei Geral de Proteção de Dados (LGPD), Brazil had 40 different statutes governing personal data laws. This new legislation unifies all the contradictory ones in one simple, complete document. It took effect in September 2020. 

LGPD applies to all businesses with customers in Brazil without considering the company’s physical location. This statute shares an apparent similarity with GDPR in this sense. Due to this arrangement, if your company is already following GDPR, LGPD compliance won’t be too problematic. 

Unlike the EU regulation, its Brazilian counterpart doesn’t have a single definition of ‘personal data.’ However, its fundamental compliance principles are similar to the GDPR. Data subjects have the right to: 

  • Confirm processing
  • Access the data
  • Correct the incomplete, inaccurate, or out-of-date information
  • Anonymize, block, or delete unnecessary or excessive information
  • Request an information transfer to another service or product provider
  • Give consent to deletion of personal data
  • Get information about the entities that received data from the controller
  • Be informed that they can deny consent and what consequences it can have
  • Revoke consent

Although there are undeniable similarities between GDPR and LGPD, there are also a few differences. LGPD lists ten legal bases for data processing, instead of the 7 in the EU document.

Another variation is that LGPD doesn’t give a restrictive communication deadline if a breach happens. Controllers need to declare the problem within a ‘reasonable timeframe.’ 

In Brazil, violation fines aren’t as severe as in Europe. The infringement will result in 2% of revenue for the previous fiscal year, excluding taxes. The largest penalty can’t exceed 50 million reais. 

CCPA

California’s Consumer Privacy Act (CCPA) regulates privacy issues between businesses and individuals in the state of California. Many experts argue that the bill isn’t efficient only within the state. They advocate for wider federal involvement. Still, the law took effect at the beginning of 2020 and improves state residents’ privacy status.

It covers those California-based businesses that fulfill at least one of the following criteria:

  1. Companies that have $25 million gross revenue
  2. Businesses that process details from 50,000 or more consumers
  3. Businesses that earn more than half of their annual revenue from data processing

Comparing CCPA to GDPR unveils some differences. First of all, the California Privacy Act is more specific. Second, it only covers the information that a consumer provided directly. Purchased data isn’t protected. Third, consumers can opt-out if they don’t want their information sold to third parties.

There’s a 30-day window to give the companies a chance to comply after receiving a violation notice. The infringement brings forth a penalty of $7,500 per record, but they add up quickly. 

Businesses should also know that a resident can open a class-action lawsuit against the company in case of violation. This law gives its consumers more opportunities to defend their personal data.

How Data Protection Affects Business in 2020

Data protection regulations in their current, technology-powered form are still very new for all the parties. Authorities are having trouble envisioning all the scenarios where the law will apply, let alone the enforcement methods. Checking their efficiency in the real world sounds even more difficult.

It’s relatively easy to enforce this regulation on brick-and-mortar businesses. Still, SaaS companies create many issues due to the ever-changing nature of the internet and technology.

Business owners get frustrated about the unclear and sometimes quite expensive ramifications of failing to comply. Building an excellent data protection framework for a business can be challenging for a few reasons.

First of all, companies have to start asking questions that will ensure they reach compliance goals. Before that, they still have to find those questions. Second is the objective inability to standardize the rules across industries and business models. Third, constant amendments and regulation updates can be hard to follow.

Still, avoiding violation notices shouldn’t be the only reason you want to follow the legislation. If you consider some directives, they’re an excellent framework to forge brand loyalty and trust with your customers. This point of view can be refreshing when you get stuck reading long legal documents. Ask yourself if being a trusted brand is your ultimate goal.

What Your Business Should Do

Let’s consider all the challenges surrounding data protection and law enforcement. In this context, SaaS businesses can take a few steps to have a smooth transition.

Step 1.

Hire an attorney, read the law, and follow the directives. We can’t overstate the importance of this step. This crucial move is ‘ground zero’ that you have to cover first.

Step 2.

Consider the basic rules within the regulation and forge your version of compliance. There are no universal solutions.

Step 3.

Become aware of what consumer details you own and how you use them. Doing this will bring you towards understanding and clarify your data collection goals.

Step 4.

Build clear and concise communication with the user. Be transparent about what information you collect and how you process it.

Step 5.

Grant users more control over their data. They need to be able to feel safe about the information they agree to share.

Step 6.

Data processing isn’t limited to your company only. Make sure that third parties that use your company data also follow the regulations.

Conclusion

Data protection is a progressive challenge for all innovators, legislators, and users. SaaS companies have a special place among these parties because they deal with a large amount of customer information.

The importance of an excellent data protection strategy for software businesses becomes more evident as we come to realize their vulnerability in data collection and processing.

User trust is the ultimate factor for SaaS success. So compliance isn’t a legal hurdle. It’s the basis for better and more transparent business operations.

Victor Maia

Victor Maia

CMO as a Service @Hack4Change, Head of Community @SaaSholic and Community Manager for Team GaryVee Brazil. Eventually writes on https://elemento.ag/blog/ and podcasts on https://growthdiaries.me/.

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