Data portability refers to the users’ ability to obtain and transfer a copy of available data from one data controller (such as an app or online service) to another.
When users ask for their data to be ported to a third party, data controllers must provide that third party with access to the user’s data in a standardized, machine-readable format, either directly through a direct download or an open API. Data controllers must also make data accessible to consumers without any limitations imposed by technical or legal requirements.
Additional requirements may be outlined by data portability laws and regulations, such as whether data controllers are allowed to charge for data access, how frequently users must request and receive copies of their data, or what kind of structured format controllers use for the data they provide. They may also demand that data controllers send information to third parties directly or set up particular technical requirements for user authentication or secure information transmission.
Data portability policies may also impose conditions on third parties receiving user data, such as security requirements or limitations on their ability to use the data. They might also define who is responsible for data breaches or misuse. Lastly, data portability policies typically outline which data are subject to this requirement and which are exempt.
Data portability and data access provisions are similar but different. Data access may also call for data controllers to permit users to request copies of their data. The data need not, however, be provided in a machine-readable format that prevents further reusing, according to data access requirements.
What are the benefits of data portability?
Data portability has three key advantages: it gives consumers more control, increases the value of their data, and encourages competition. Depending on the industry and data involved, data portability has varying potential benefits.
First, data portability gives users more control over their data. Fundamentally, data portability ensures that customers always have the option to obtain a complete copy of their data and take full control over it. Thanks to data portability, consumers can independently back up their data without relying on a third party. To ensure they still have a copy of their data even if they stop using the app, consumers can archive a copy of any personal photos they may have created and shared using a mobile app. Data portability ensures users don’t lose their data when a company ends a service, converts a free service to a paid service, modifies its terms of service, or goes out of business.
Second, data portability may enable users to maximize the potential of their data. Access to data by organizations is a requirement for data-driven innovation. Data’s utility is constrained by the uses to which it can be put when connected to just one service. Because data portability enables users to share their information with more services, there are more opportunities for data-driven innovation due to increased productivity, data availability, and the potential for data reuse.
For instance, customers could use data portability to easily move a digital record of their credit card usage to an online budgeting app. In addition to giving consumers better financial insights, this data transfer capability also enables a whole new class of financial planning apps that would not otherwise be possible without access to this data. Similar to how consumers with little credit history may find it difficult to obtain credit, data portability enables them to demonstrate their cash flow on prepaid card accounts, creating new underwriting opportunities.
Data portability can improve competition in four significant ways, to sum up. First, by enabling users to transfer their data from one service provider to another and lowering switching costs, data portability promotes competition and prevents vendor lock-in. With data portability, businesses are less likely to artificially lock in customers by making switching providers prohibitively expensive or difficult.
Second, data portability can foster competition by increasing the transparency of costs and available options. Customers could, for instance, use an app to review their bank fees to determine whether they would save money by switching to a different financial institution or analyze their home energy usage data to determine whether they would pay less with an alternative energy provider.
Third, data portability encourages companies to keep customers by providing superior services, which has a pro-competitive effect. For instance, when customers can easily switch music streaming services, these services may invest in novel strategies to maintain user engagement on their platform, such as improving recommendation algorithms.
Fourth, data portability enables new entrants to compete more effectively with established companies whose data may have been gathered in accordance with less stringent data protection laws and regulations. Data protection laws may have anti-competitive effects, harming consumer welfare and stifling innovation if they don’t permit data portability and secondary uses.