Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
Where the UK is heading with Smart Data and why Fintechs want a cross-sectoral access
Innovate Finance | Rolf Merchant | Sep 7, 2021
Data is a hugely valuable currency in the financial services world. In sufficient quantities and with the knowhow to analyse and interpret it, data provides a tremendous amount of knowledge for financial services companies. The old tenet “knowledge is power” could justifiably be updated to “data is power” for 21st century finance.
What is Smart Data?
Smart Data is the secure sharing of customer data with authorised third-party providers upon the customer’s request.
These providers then use this data to provide innovative services for the consumer or business user, such as automatic switching or better account management.
Data sharing could unlock a huge number of benefits for consumers and businesses alike.
Read: Kalifa review of UK Fintech report
We might see the creation of an entire “data economy”, where consumers are more informed and empowered because of the data they can access, and where businesses can make use of shared data to create and improve products and services that target real needs and desires. This is why FinTech companies are so interested in the Smart Data initiative.
Next steps for Smart Data
We were particularly interested to read the report in June from the UK government’s Smart Data working group, Next steps for Smart Data. It was encouraging to see a reaffirmation of the value of financial services-specific initiatives such as Open Banking and Open Finance.
The report detailed a number of the brilliant uses of Open Banking by FinTech companies – including by some of our own members like Yapily, Yolt and Monzo – showing the power of shared data in action.
It was even more promising to read practical proposals for cross-sector coordination. It’s worth referring to the Kalifa Review, which listed taking a “cross-sectoral approach” as the number one recommendation for Smart Data.
See: Will the Law Keep Up with Smart Contracts in 2021?
Innovate Finance agrees with the working group’s four key principles to inform the design of cross-sector coordination and collaboration, as detailed in the Next steps for Smart Data report. These four principles are:
- Sectors working together – bringing together all bodies leading sectoral delivery of Smart Data with industry and government to enable coordination.
- Develop the Smart Data ecosystem – sharing information and drawing on shared expertise to tackle common challenges and support cross-sector innovation.
- Enable interoperability – to address barriers to competition and realise Smart Data benefits for consumers and businesses.
- Inform the ongoing development of the Smart Data framework – ensuring the ecosystem remains responsive to changing user attitudes and technological developments will be important. Pooling research and findings to develop a cross-sector picture of adoption, attitudes and capabilities will provide an opportunity to identify and consider emerging opportunities and challenges.
What does FinTech want from a cross-sectoral approach?
The Kalifa Review listed specific concerns of the FinTech community relating to Smart Data, including smaller firms not having sufficient access to data to develop innovative products and to compete with established firms with large customer bases and data sets. There is a real need for any cross-sectoral approach to take into account the interests of FinTech startups and scaleups.
Read: FCA Speech: Levelling the playing field – innovation in the service of consumers and the market
The Kalifa Review stressed the need for the government to facilitate (or, where appropriate, mandate) the sharing of data not just within sectors (such as Open Banking), but also between sectors. It added that a cross-sector approach must bring firms that hold very significant amounts of data, such as large technology companies, into the fold.
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