The open data revolution is upon us – and it begins with financial services

Image credit: ZinetroN / Shutterstock

Tuesday’s King’s Speech confirmed we could be within months of a change in UK law with the potential to transform people’s lives and turbocharge economic growth.

The government has committed to “opening the door to game-changing new technologies” through the Data Protection and Digital Information (DPDI) Bill.

The end objective is to achieve ‘open data’, where all types of personal data – financial, biographical, demographic, employment, etc. – can be securely shared within a trustworthy ecosystem.

People will be able to verify their identity online with the same confidence as with paper documents. In our digital economy, an ever-increasing proportion of goods and services are bought and consumed online.

Imagine the net benefit to individuals, businesses and society at large, if people were able to selectively and securely share their personal data with trusted parties, allowing them to instantly receive offers tailored to their specific needs, wants and situations.

The Department for Science, Innovation and Technology has estimated that the bill will boost the UK economy by £4.7bn over the next decade alone.

In short, the DPDI bill seeks to reconceptualise data as a force for good, something that can empower consumers, rather than just raising privacy concerns. The organisation I chair, the Centre for Finance, Innovation & Technology, is keenly aware of the potential benefits of enhanced data-sharing in the realm of finance specifically. This is a subset of open data that we call ‘open finance’.

Fully realised, open finance could create a future where your phone can help you make smarter decisions in every aspect of your financial life – from weekly budgeting to retirement planning.

This could transform financial literacy, effortlessly and instantly offering people a detailed understanding of their personal finances. That would be especially vital at a time when a majority of British adults are still reporting month-on-month increases in their cost of living and real household income is set to fall 4% over a two-year period.

Small and medium-sized enterprises also suffer from the walled gardens into which the financial services industry is currently divided. Being able to obtain a complete picture of their finances will help those businesses facing a challenging trading environment in which corporate insolvencies rose 10% year on year in Q3 2023.

Open finance at the forefront

We believe that open finance has the potential to be at the cutting edge of the UK’s march to open data – for three main reasons.

Firstly, perhaps most obviously, financial services comprise a sizeable chunk of most people’s and businesses’ data footprints. It simply won’t be possible for the UK to achieve a modern, digitally enabled, API-driven, globally connected economy without successfully opening up financial datasets.

Fortunately, the UK has a world-leading fintech sector with the ability to move quickly, build new products and services and partner effectively with large incumbents. The regulatory environment is also highly amenable to this kind of innovation.

At his Mansion House speech last month, Nikhil Rathi, CEO of the Financial Conduct Authority (FCA), outlined the opportunities that a digital ID offered for consumers. Expect finance to blaze a trail and act as a testbed for open data principles that other industries will seek to emulate.

Secondly, the government is using the success of open banking as the first step towards unlocking a wider smart data economy. The UK was a world leader in making open banking a practical reality.

The standards developed here enabled secure sharing of consumers’ transactional data and have since been adopted in 80 other countries worldwide. The DPDI bill will help consolidate that success.

Thirdly, and finally, we are seeing the progress being made within open finance. The question of how to apply open banking-style data-sharing to financial services more broadly is high on the industry agenda.

Bringing industry onboard

CFIT has convened an industry-wide coalition on how to drive forward open finance, enabling the secure sharing of other types of financial data (e.g. savings, investments, insurance, mortgages, credit scores, pensions). By early next year, we will be laying out our recommendations for industry and government.

Those recommendations will essentially double as the financial services leg of the UK government’s forthcoming smart data roadmap, which is part of the DPDI bill. Putting in place primary legislation is another important step towards delivering the benefits of Open Data, for consumers and the wider economy. It builds on the work of the Smart Data team in the Department for Business and Trade, which is partnering with the Smart Data Council to secure industry feedback.

But for all these encouraging signs coming from government and industry, we must recognise that we are under significant competitive pressure here. In the coming decade, open data will become the hallmark of the most sophisticated economies and societies. But there is a major first-mover advantage.

Those countries at the vanguard of the open data revolution can set global standards, build relationships with overseas hubs and develop cross-border economic partnerships based on interoperable data standards.

Open finance prize is enormous

If we get open finance right, we can win this race. The prize on offer is enormous. Consumers will have greater control of their financial lives and improved access to financial advice and affordable credit products. SMEs benefit from reduced friction in accessing banking services. The UK economy is boosted by enhanced commerce and trade digitalisation.

The provisions for common data standardisation and secure sharing set out in the DPDI bill may seem technical and abstract. They are anything but.

Open banking showed the way. Now the open finance revolution is the next step towards opening up all other datasets so that the UK can become a globally competitive, smart data economy.

Charlotte Crosswell OBE is the chair of the Centre for Finance, Innovation and Technology (CFIT).