The UK is the pioneer of Open Banking and has led the world in setting frameworks for data sharing. The country is now at the forefront of establishing data as a new form of currency with a Smart Data Roadmap and there is a clear recognition of value associated with it.
There is an ambition to harness the opportunities presented by data to create a more efficient, tailored, and empowered ecosystem for both businesses and individuals. And work is being done to take the right steps in future with the Smart Data economy.
What is Smart Data?
Smart Data is customer and business data which can be used by authorised third-party providers (APP) to provide tailored service offerings, ensuring that customer consent is at the heart of data portability and that data security is of utmost importance as we power through data-sharing initiatives.
Using the strengths of Open Banking
The UK government’s Smart Data Roadmap, published in April 2024, would apply the central tenets of Open Banking – safe data sharing with customer consent – to the designated sectors.
Sonal Bomb, chief executive officer of TechnoXander
These seven sectors identified in the roadmap include energy, banking, retail, finance, transport, telecommunications, and the purchase of homes. Each was chosen with a view to maximise benefits and deliver a successful Smart Data economy, while leveraging the work delivered for Open Banking.
- Existing framework: The UK already has a successful Open Banking framework. The Smart Data plan recommends leveraging and learning from this framework with the aim of reducing implementation time and cost;
- Consumer trust: Open Banking built a trust environment for data sharing and, when handled responsibly, the same can be done to build consumer engagement in any future or existing Smart Data schemes;
- Innovation: Open Banking has delivered a step change in financial services. Smart Data can replicate this success across sectors, leading to new products and services tailored to the individual.
Opportunities for improvement
Open Banking did establish a framework for data sharing; however, take-up has been slower than anticipated. TechnoXander has supported banks in the Open Banking compliance journey and there are several opportunities for improvement based on the work done to date. Here are some key areas which will make a difference to how well Smart Data gains momentum:
- Data quality and accessibility: Limited API quality and discoverability challenges adversely impacts integration within the ecosystem. The creation of standardised high-quality APIs and providing effective discovery mechanisms are key components of a successful data-sharing ecosystem;
- Implementation costs: The cost of Open Banking implementation was a barrier to entry for many firms and this, in turn, has impacted adoption. With the Smart Data Roadmap, we should aim to reduce costs and apply principles of proportionality;
- Sustainable funding model: Open Banking did not have a clear and sustainable funding model. The Smart Data Roadmap suggests cost benefit assessments to consider financial and non-financial impacts and explores innovative funding mechanisms that work for consumers, data providers and data users in a quality manner. It should go a step further and aim to make a Smart Data economy self-sustaining, with avenues for commercial models set out from inception.
What lies ahead for Smart Data
The successful delivery of a Smart Data economy will have huge benefits for the UK. But, we need more than just willingness. We need a framework which will take the below into account:
- Coordination: Combined efforts by the government, industry players, and consumer organisations will be key in the development of a successful Smart Data plan;
- Consumer focused: For it to work, the trust and empowerment of consumers will have to be obtained via clear principles of data ownership and control. This will be vital to achieving mainstream adoption;
- Monetary motivation: Giving businesses incentives to engage and invest in Smart Data will be key to breaking the current deadlock as seen in Open Banking;
- A stronghold: Given that the entire roadmap revolves around data, strong security and data privacy regulations will be essential to guide and enforce responsible sharing.
To review
Overall, the UK needs to identify efficiencies that can help minimise the cost of scheme development and implementation. This may involve streamlining processes, leveraging economies of scale, or exploring innovative approaches to reduce the burden on participants.
The lack of quality APIs and limited discoverability, and slow adoption, all of which have hindered the broader adoption of data portability in the UK, all need attention.
Lastly, we need to ensure a funding model for Smart Data schemes that aligns with, and ensures, consumer interests are at the forefront.
To do this requires balancing the needs of data providers, data consumers and customers themselves. Combined with the government’s Smart Data Roadmap, the UK should be heading towards a more data-driven economy.
Sonal Bomb is chief executive officer and co-founder of TechnoXander
Further reading: UK government publishes Smart Data Roadmap
