Earlier this month, the UK government launched its Smart Data Consultation (Consultation). The Consultation follows the publication of the terms of reference which launched the smart data review late last year, and seeks input on proposals to:
- enable data-driven innovation in consumer markets;
- use data and technology to help vulnerable consumers; and
- ensure consumers and their data are protected.
What is smart data?
Smart Data is an extension of the right to data portability which individuals have under the General Data Protection Regulation. The crux of what makes consumer data ‘smart data’ is that it can be easily and securely transmitted from one third party service provider to another, so that the data can be used to provide innovative services to consumers. The Consultation envisages that smart data will:
- be immediately transferred on the request of the consumer;
- use Application Programming Interfaces (APIs) to share data securely,
- where required, be formatted as a continuous flow of data between service providers rather than a one-off transmission;
- adhere to certain common technical standards, data formats and definitions to minimise access barriers and ensure interoperability; and
- if necessary, be accompanied by certain product and performance data to facilitate further innovation.
Data driven innovation in consumer markets
The Consultation envisages that a key use of smart data will make consumer management of their household bills easier. This can be facilitated by allowing smart data flows between third party providers to make it easier for consumers to switch services. An objective of the Consultation is the use of smart data will allow for billsplitting services, automatic switching services, and advanced comparison tools, allowing consumers to find the best services for them based on their historic data and preferences. This interoperability has an overlap with other consumer protection and competition principles that allow consumers to switch easily between services, even though data protection and the right of portability has been treated as an independent right under EU law.
The Consultation is focused on consumer smart data within regulated markets including financial services, energy and communications. The Government anticipates that it may introduce legislation introducing smart data initiatives into other markets, if Parliamentary time permits.
Smart data and vulnerable consumers
Open banking is an initiative which smart data is in part derived from. It is identified by the Consultation as offering many benefits to vulnerable consumers which can be adopted by smart data outside of banking. In particular, the Consultation sees smart data as allowing for services which are more accessible, simpler to use, require less effort and offer less complex decisions for vulnerable consumers to face. The Consultation cites a trial in the energy sector where the regulator, Ofgem, gathered data on tariffs paid by consumers. Consumers who had paid higher rate tariffs without switching for a period were invited by Ofgem to switch tariffs to avoid being penalised for loyalty by not receiving more cost effective tariffs offered to new consumers. Consumers who were invited to switch tariffs were nearly 10 times more likely to switch than a control group who received no such invitation.
Protecting consumers and their data
The Consultation has set out the following proposed rules for smart data:
- third party providers should only access smart data once the explicit consent of the consumer has been gained and verified through a secure authentication process;
- access to smart data should be limited and revoking access should be as easy as giving access;
- only accredited third party providers should be able to access high risk data (there is no information in the consultation about such an accreditation process);
- third party providers should only be able to pass smart data to other third party providers for i) approved purposes and ii) once the consumer has provided their consent; and
- in the event of data loss or misuse there should be clear liability rules and swift redress mechanisms in place for consumers.
The Consultation seeks to facilitate the transmission of data from one service provider to another as well as combine competition and consumer protection issues on interoperability between services providers and systems. The Consultation is open until 6 August 2019.