Smart data central to next evolution in banking services

The forthcoming Data (Use and Access) Bill will make real-time data portability a reality in the UK and “power a new frontier” in the countryʼs financial services according to Charlie Mercer, policy director at the Startup Coalition. However a public education campaign is needed to fully realise the benefits.

Speaking during a panel session on open finance at the Building Societies Association (BSA) 250^th anniversary conference in Birmingham on May 7, Mercer said that while the General Data Protection Regulation (GDPR) had given individuals more control over their own data, the Data (Use and Access) Bill would make this meaningful by delivering real-time portability.

Mercer echoed Gavin Starks, founder of data and sustainability non-profit Icebreaker One, speaking at the Innovate Finance Global Summit (IFGS) in London last month. Starks said that 2025 was a “very exciting year” as the Bill would “move the needle and get people to the table”.

Starks, who co-chaired the smart data council at the Department for Business and Trade until March, said smart data would remove the current “friction” when moving data and would, for example, allow the data from an energy smart meter to be used by a mortgage provider when offering a green home loan.

Education

However, Michael Lawrence, CEO of Australia’s Customer Owned Banking Association (COBA) cautioned that if the UK wanted to avoid the pitfalls his country had encountered, it should launch a public education programme to explain the opportunities of smart data for people’s finances.

Open banking — known in Australia as Consumer Data Right (CDR) — had “stalled”, Lawrence said at the BSA conference. “The government hasn’t kept its promise to put money into public education,” he added.

Unbanked and vulnerable

Ellie Duncan, head of content at Open Banking Expo, told a panel at the BSA conference that smart data was helping to provide access to mainstream credit. “It is allowing the offer of mainstream credit to people who would have previously gone for high-cost credit,” she said.

In his keynote at the BSA conference, Rodney E Hood, acting US Comptroller of the Currency, explained how access to data beyond that held by credit reference agencies was enabling banks in the US to provide loans to individuals who would traditionally have been turned down. This was being achieved through a pilot programme run by the Office of the Comptroller of the Currency’s (OCC) Roundtable for Economic Access and Change (REACh) project.

“Today, Project REACh participants are supporting financial inclusion in several ways. For example, successful pilot projects have proven that expanding the availability of credit by extending consumer loans to customers with thin- and no-credit files by using transaction data rather than credit scores opens the financial system to consumers who were previously credit invisible,” Hood said.

Back in the UK, the Centre for Finance Innovation and Technology (CFIT) and the charity Citizens Advice have run a proof of concept that saw transaction data, combined with data from HM Revenue and Customs and credit reference agencies, used to create a standard financial statement.

The statement greatly reduced the time it took Citizens Advice to offer tailored support to indebted individuals. The charity estimates it could offer targeted support to an additional 150,000 people a year if such enhanced data sharing was rolled out more widely.  

Duncan at Open Banking Expo said smart data could help people build financial resilience and “bring in other sectors that really touch people’s lives”, such as utilities. “Open finance could be used to identify customers who should be on social tariffs,” she explained.

Smart data could be “hugely valuable for vulnerable people” but oversight is also essential, according to Milly Zimeta, head of digital and data policy at consumer group Which?

Speaking at the IFGS, she said: “The [Bill] is potentially a really big achievement because it is going to drive smart data forwards, but two things are missing for us. One is the lack of a central coordinating body, so smart data schemes roll out across the economy and society in a sector-based way and [the other] is the [lack] of a consistent definition of vulnerability.”

Zimeta said Which? would like the Department of Business and Trade to take the central coordinating role and for there to be a single definition of vulnerability, to avoid people “falling through the cracks”.

The House of Lords agreed final amendments to the Bill on May 12. It will now return to the House of Commons for its final reading.