Thought Leadership

Seizing the moment: Why time is of the essence for Smart Data legislation

11 April 2023

The UK government’s commitment to deliver Smart Data legislation through the Data Protection and Digital Information (DPDI) Bill is a significant milestone towards creating a world-leading open data economy. It is an essential piece of legislation that will help extend and build on the benefits already experienced by open banking users to date.  

Open banking is a financial innovation that allows users to share their current account data securely with authorised third-party providers (TPPs). These TPPs can then use this data to offer personalised financial services, including money management tools, access to cost-effective credit, and alternative payments. 

Smart Data legislation will allow the government and regulators to extend open banking and to mandate new Smart Data schemes in other sectors, including energy, telecoms, pensions, mortgages, and insurance. This should create competition and deliver better outcomes for consumers and small to medium-sized enterprises (SMEs) alike.

By using data held by our service and utility providers, consumers will have a holistic overview of their energy usage, finances, and phone and broadband usage and costs, for example. They will also have access to tailored recommendations of products and services that may better suit their needs, potentially finding new deals and offers with alternative providers.

These legislative and regulatory reforms come at a critical juncture when many people in the UK are struggling to meet the rising cost of living. With 15 per cent of people in the UK having no savings, and 18 per cent of UK adults needing debt advice, smarter money management and access to tailored services like open banking and other Smart Data schemes are essential. 

Smart Data is expected to support consumers with protected characteristics such as disability and race, especially those who are also financially vulnerable. It will change the way we look at data, improving individual’s engagement with markets and increasing customer empowerment. SMEs that currently rely on open banking technology to accurately oversee their finances and keep late payments in check, will also get access to the benefits of Smart Data. 

The legislation will provide a foundation for a regulatory framework that should enable new services and products to emerge while protecting the interests of consumers and SMEs. This would lead to greater competition, lower costs, and more choice for customers. It will also aim to integrate an even wider range of financial services, including loans, investments, insurance, and more, moving us closer to realising Open Finance. 

However, the implementation of any new regulatory framework can pose challenges. The good news is that we can learn from the successful approach used for open banking, one that created a centralised implementation entity that delivered a defined Roadmap and focused on fostering collaboration between stakeholders.

Open banking has demonstrated that it’s possible to encourage competition and innovation in the financial services industry while protecting consumers’ interests. 

It is essential to ensure that the benefits of a Smart Data framework are evenly distributed across society. The regulatory framework must include measures to ensure that everyone, regardless of their socio-economic background, can access and benefit from the new services and products that emerge. The challenge lies in ensuring that the benefits of innovation are accessible to everyone. 

It is also essential to progress the Smart Data legislation at pace. The government has worked hard to make Smart Data a reality, but it is now essential for parliamentary time to be dedicated to getting the legislation adopted. Other jurisdictions, such as Australia and Singapore, are progressing similar initiatives, and progress needs to be made if we are to ensure the UK remains competitive and a world leader in this field.  

Other countries are already moving forward with similar initiatives, and the UK needs to act if we are to remain world leaders and build an innovative open data economy. Failure to do so could result in the UK falling behind its global competitors and missing out on the economic benefits of innovation. 

In conclusion, the Smart Data legislation will be a significant step forward in improving consumer outcomes and supporting SME growth. It has the potential to contribute to economic development and promote greater financial inclusion. With the proper safeguards and regulatory framework, Smart Data can transform the way we manage our financial and economic lives and promote greater financial well-being for all.