FinTech
First up, what is Open Data and where did it come from?
Most people involved in financial technology know how the implementation of Open Banking in the UK tipped the balance of control and ownership of consumer payment account data into the hands of customers, rather than financial services providers.
The next natural progression to Open Banking is what is being referred to as “Open Finance” – where shared data will cover all areas of finance not just payment account information.
But why stop at finance data? That’s where Open Data comes in.
Open Data is essentially what it says on the tin – the notion of connecting a broad range of consumer data on a free to use, re-use or redistribute basis. Extending to utilities, telecommunications, and other personal information (obviously at all times in a GDPR compliant way *all privacy professionals give a huge sigh of relief*).
This will undoubtedly improve the consumer experience, but it will also enable Fintechs and financial institutions to develop applications which enhance products and services.
UK vs The World?
The UK may be seen as falling behind the regulatory curve in comparison to other overseas data-sharing frameworks (such as our peers Down Under). However, whilst Open Data remains in its infancy in the UK, a drive by the industry to develop legislation means that it can’t be too far away from the mind of the UK’s Financial Conduct Authority (FCA). Recent recommendations from the UK government’s Joint Regulatory Oversight Committee (JROC) on the future of Open Banking, suggests positive steps towards a simplified regime that prioritises innovation.
The new framework plans to establish sustainable and competitive footing to allow growth beyond the current functionalities, unlock potential for Open Banking payments and adopt a model that is scalable for future data-sharing propositions. The success of which, will be measured on the growth of the eco-system where we should see a shift towards the concept of ‘Open Data’.
What can firms expect from a regulatory perspective?
As industry is moving faster than regulation, it is likely that we will see regulators and legislators in the UK playing catch up, with updates from both likely on the horizon.
Unsurprisingly, the FCA have recently stated that “a legislative framework [is] needed for open [finance] to develop fully – both to provide any statutory right to data access and to support a regulatory framework. Even if mandated by legislation, open [finance] will best flourish if the right commercial incentives exist for firms to invest and participate on a sustainable, and probably reciprocal basis”.
The use of the phrase “reciprocal” is probably music to the ears of the UK’s biggest financial institutions, who have frequently raised concerns about the one-sided data flow under the current Open Banking regime.
With all the above in mind, it is only a matter of time before we see the UK data regime take successful steps towards Open Finance – and ultimately Open Data.
The expansion into Open Finance (and eventually Open Data) will present new challenges for established Fintechs, start-ups and other entrepreneurial ventures.
If you want to know more about how to navigate the current regulatory landscape (or to future-proof your business, products or services as the UK expands into Open Data), please get in touch with our team of Fintech specialists.
This article has been prepared for information purposes only. For specific queries, legal advice, or any further information, please contact us on LinkedIn or via hello@founders-law.co.uk
