On 23 October 2024 the UK government introduced the Data (Use and Access) Bill to Parliament (the DUAB). The DUAB is a wide-ranging and significant reform package with implications for all businesses operating in the UK. In our blog ‘UK announces data reforms: what businesses need to know’, we explained the background to the Bill and its key provisions. In this blog, we take a closer look at Part 1 of the DUAB, which establishes ‘smart data schemes’, which are intended to put the UK’s existing Open Banking regime on a statutory footing and expand personal data portability and sharing schemes to other sectors.
Smart data schemes: an overview
The UK’s pioneering Open Banking regime, which enables UK customers to move and manage money between financial institutions, has widely been seen as a technological and economic success. As of March 2023, it had facilitated 82 firms to raise over £2 billion of private funding and created over 4,800 skilled jobs through various innovative apps and services tailored to help users deal with their financial data. Despite this, the UK has been slow to mirror the efforts of other jurisdictions such as the EU (through the Data Act and European Data Spaces) and Australia (through its Consumer Data Right) to expand open data to other domains.
‘Smart data’ aims to continue to build on the economic benefits of Open Banking through third party innovation around new data flows, at the same time as addressing broader policy concerns related to data portability as a competition concern and barrier to user access and choice.
Under the DUAB, the Secretary of State or the Treasury will have the power to make regulations relating to the secure sharing of customer data, upon the customer’s request, with authorised third-party providers (ATP). The sectoral specific regulations will then set out the scope in each scheme – this can include: (1) parties who are required to provide data; (2) the kinds of data which should be provided; (3) how and when to provide such data; (4) how the data is secured and protected; and (5) the payment of fees and financial assistance.
How we envision smart data schemes being used
The DUAB provides a framework for data sharing but does not directly authorise specific use cases. Further regulations to be made by the Secretary of State or the Treasury will be required to enable such schemes. In April 2024, the former Conservative UK government published a Smart Data Roadmap, which outlined priority sectors for smart data schemes (ie banking, finance, energy and road fuels, telecommunications and transport) . While the new Labour government is yet to articulate the full range of use cases it intends to pursue, we anticipate that they will mirror at least some of those in the roadmap and may extend to other sectors especially where there are potential ‘cost of living’ benefits.
Examples of potential smart data schemes include:
- Pension Dashboards – the Labour government has indicated that they support the principle of enabling multiple pension dashboards services. This is a scheme which will enable consumers to view all their existing pension pots in one clear dashboard, allowing individuals to more easily keep track of their pensions savings.
- Telecommunications – As outlined in the roadmap, Open Communications may be used to allow for data portability between mobile networks or broadband providers.
- Finance – Open Finance may open the doors for utilising data sharing to increase accessibility across a wide range of products, such as retirement, savings, investments and cash flow management.
In addition to the priority sectors identified in the Smart Data Roadmap, other potentially impacted sectors include retail and consumer goods, health care, entertainment and home buying.
Why does this matter for businesses?
Businesses should be on the lookout for emerging schemes that may apply to them. This is because smart data schemes: (1) carry compliance burdens and risks for businesses required to share data; and (2) present commercial opportunities for businesses looking to exploit such data.
Costs of compliance and risks
The impact of smart data schemes will depend on sector specific regulations. In Open Banking, we have seen that the UK has taken a regulator-driven approach to setting standards as opposed to the industry-led approach adopted in other jurisdictions, such as the United States. If a similar approach is taken in smart data schemes, it will be important for businesses to consider engaging proactively with scoping and standard setting processes to manage potential business impacts. This is especially so given the broad regulation making powers conferred on the Secretary of State or the Treasury, which extends to topics such as fees and financial assistance.
In addition, businesses should take steps once schemes are established to manage risks associated with participation in such schemes. The DUAB currently does not propose to afford any liability protections to businesses required to share data and largely defers the question of safeguards to sector specific regulations.
Commercial opportunities
Smart data schemes are intended to create economic opportunities for businesses seeking to leverage such data for the benefit of consumers. Accordingly, smart data schemes are likely to present opportunities for new market entrants focused on leveraging consumer data, such as mobile app developers and consumer choice service providers.
While smart data schemes undoubtedly have a cost, businesses that will be required to share data may also wish to look for opportunities to benefit from such schemes. By taking a proactive approach, businesses can seek to position themselves to utilise smart data schemes to improve their own services and exploit potential first mover advantages. Early engagement with regulators and entry into smart data schemes may also allow for businesses to exert greater influence over the development of schemes, including technical specifications, that as noted above may significantly impact the cost of compliance.
Conclusion
It is not surprising that the UK government has sought to position smart data at the centre of its data reform package. It promises economic opportunity and improved consumer choice. However, with nearly all of the detail left to regulation, time will tell whether the reality meets the hype.
Businesses in potentially affected sectors may wish to:
- Consider getting involved in policy discussions: we anticipate that there will be significant debate around where and how smart data schemes should be rolled out.
- Monitor policy developments related to the expansion of data schemes to new sectors. Early indications are that the new Labour government is thinking creatively and expansively about potential use cases.
- Move quickly to consider risks and opportunities where a data scheme may impact the business. As noted above, risks and compliance costs can be significant but there are also commercial opportunities.
For more information about our the Data (Use and Access) Bill, read our blogs providing an Overview of the Bill and our deep-dives on Digital Verification and Data Transfers.
