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Fintechs are likely to be pleased as the new UK government commits to passing a new smart data bill in the coming year.
King Charles has read out the Labour Party’s legislative programme for the coming years, which includes a new Digital Information and Smart Data Bill, in the King’s Speech, which opens the new parliament.
This is likely an adapted iteration of the previous government’s Data Protection and Digital Information (DPDI) Bill, which was viewed by the UK’s fintech industry as crucial for regulatory clarity regarding open banking and open finance.
So far, fintech players have welcomed the news that legislation will be back.
“It's great to see the new government recognising the role of fintech in driving growth by bringing back smart data provisions to progress open banking and open finance,” Jack Wilson, vice president of policy and research at TrueLayer, told Vixio.
Meanwhile, Janine Hirt, Innovate Finance’s CEO, said that the organisation was “delighted”.
According to Hirt, the new government is “prioritising legislation that will enable the UK to build on our initial innovations in open banking, extend it to open finance and enable digital verification”.
Hirt said that this can power growth — with the potential to create £215bn extra GDP over five years — and increase financial inclusion for all.
“The King's Speech also includes measures which will help unlock institutional investment into our growth firms,” she said. “Legislation to enable consolidation of pension funds and to set up a National Wealth Fund should help develop vehicles for greater investment in UK fintech.”
Enhancing open banking
Open Banking Limited (OBL) also welcomed the government's announcement of the Digital Information and Smart Data Bill, praising it as a significant step towards enhancing the UK's open banking ecosystem.
OBL highlighted the current economic impact of the open banking ecosystem, which is already valued at more than £4bn, noting it is attracting investment and creating nearly 5,000 skilled digital jobs across the UK.
Marion King, OBL chair, expressed enthusiasm for the government's commitment, stating: “It’s great to see the government prioritise important legislation that will transform the UK economy and improve people’s lives.”
Henk Van Hulle, CEO of OBL, emphasised the importance of the proposed smart data powers, noting that the future success of open banking depends on transitioning to a long-term regulatory framework.
"Prioritising this legislation will unlock further benefits for consumers and small businesses," he said.
UK leadership in smart data
OBL stressed the importance of maintaining the UK’s leadership in smart data schemes and said it looks forward to supporting the government and regulators in ensuring the continued success of open banking as a public good.
Andy Thornley, techUK’s head of financial services, also welcomed the news, saying in a press statement that “when the DPDI Bill failed to make the wash-up process before the election, we were concerned there the UK’s reputation as a leader in fintech may be at risk due to delays, while other jurisdictions such as the EU continued to make progress”.
“However, we’re really pleased to see the new government prioritising this work in the Digital Information and Smart Data Bill, which will boost the sector and deliver new innovations and services for their customers,” he said.
The UK government's commitment to smart data appears to remain strong despite a change in political leadership. In addition to the introduction of this bill, the Department for Business and Trade has advertised three new positions: Smart Data Policy Lead – Legislation; Smart Data Policy Lead – Stakeholders; and Smart Data Policy Lead – Innovation and Evidence.
“This is a brilliant opportunity to contribute to the development and implementation of Smart Data, an innovative cross-government policy with wide reaching opportunities for businesses and consumers,” the job post says.
What happened to the DPDI Bill?
The DPDI Bill was intended to establish a regulatory framework for open banking in the UK, replacing OBL with a new entity. However, it was with the House of Lords and had failed to get passed in the parliamentary "wash up", which happens when the government is tying up legislative affairs after calling an election.
The bill covered regulations on accessing and processing personal information, data sharing for law enforcement, health and social care information standards, and biometric data oversight.
However, parts of the bill were controversial.
Richard Burgon, a left-wing Labour member of parliament (MP), submitted an early day motion (EDM) — a call for a debate on a particular subject — claiming the bill would force banks to spy on welfare recipients, involving mass data scraping that could affect vulnerable individuals and their associates.
The motion warned of potential wrongful prosecutions similar to the recent Post Office Horizon scandal and argued that the bill breached financial privacy and the presumption of innocence.
The bill also faced international criticism during its lifetime.
For example, in Brussels, Dutch lawmaker Paul Tang questioned the bill's compliance with the Trade and Cooperation Agreement and the rights of EU and UK citizens, particularly regarding indefinite retention of biometric data by UK law enforcement and potential conflicts with European Court of Human Rights safeguards.
Tang asked the European Commission to assess the bill's impact on General Data Protection Regulation (GDPR) protections and to consider revoking the UK’s data adequacy decision if it was adopted.
