GUEST ARTICLE: What needs to be in place for Smart Data in the financial services sector to work for consumers?
This summer, the Data (Use and Access) Act 2025 became law, allowing Smart Data schemes to be mandated across all sectors of the economy. Smart data enables consumers to share their data between businesses and other organisations. The UK’s first smart data scheme was Open Banking, introduced by the Competition and Markets Authority (CMA) in 2017 as a competition remedy in the consumer banking market. Open Banking has catalysed innovation around banking services, and we’ve argued it’s vital that future Smart Data schemes learn from its successes and challenges.
But the consumer financial services sector is much broader than core banking (such as bank accounts and payments), and also covers loans and credit, investments and pensions, debts, mortgages, insurance, financial advice, and funeral plans. With smart data in the financial services sector - sometimes also called “open finance” - consumers can choose to safely share their financial information with businesses and organisations that provide financial services, and beyond. This could save consumers time and increase their agency - for example, through speeding up mortgage approvals, or consolidating and simplifying pension information in a single dashboard. It could create more tailored or adaptive financial products, services, or advice for consumers, by being personalised to their data. And it could enable better product comparison and easier switching by increasing transparency and reducing friction for consumers navigating more than one business - for example, making it easier to transfer money between user accounts with different providers.
Despite this, new uses of financial services data may also introduce new risks for consumers, or exacerbate existing risks. We’ve argued that the tools and services made possible by smart data in the financial services sector must be fit for purpose. For example, forthcoming pensions dashboards currently only include information about a person’s pension, but savings for retirement can also include a variety of short-term savings (such as cash ISAs) and long-term investments (like stocks and shares ISAS), each held with different financial institutions. And a consumer might also need to offset this information about their savings against information about their debts, mortgages and insurance commitments, held by other financial institutions. New forms of digital payments don’t always offer the same consumer protections as debit cards and credit cards. And we’ve highlighted that although some Open Finance use-cases might be beneficial for consumers, others might be harmful.
Smart Data’s implementation will be shaped by secondary legislation - so the government must take into account the effects on customers, holders of data, small businesses, innovation and competition. We asked experts from the financial services policy and research community, and from the UK’s Smart Data Council: ‘What needs to be in place to ensure smart data in the financial services sector works for consumers?
Verification and real-world usefulness
Nicole Sandler, Head of Corporate and Regulatory Affairs, CFIT
CFIT is the Centre for Finance, Innovation and Technology, which brings together government, industry and regulators to solve systemic challenges to financial innovation
“People must feel confident that their data is handled responsibly. Individuals need to know they’re dealing with legitimate organisations. One solution is Digital ID - a secure, scalable, interoperable way to verify identity online for both individuals and businesses. CFIT’s work convening an industry-wide coalition on digital verification has shown that while Open Banking has succeeded to date without Digital ID, verified identity must underpin the next generation of Smart Data schemes if they are to realise their full potential. This foundation is essential for enhancing trust, reducing fraud, and giving consumers greater confidence when interacting with organisations online.
CFIT’s work with Citizens Advice during our first industry coalition on Open Finance showed how enhanced data sharing could help those in financial difficulty. Automating manual processes when collecting data about a person’s finances means less time spent on administrative tasks and better insights into their situation. It could enable Citizens Advice’s advisers to support 150,000 additional clients annually. And the more tailored advice they provide could equate to a staggering average gain of £1,000 per person.
Smart Data will only thrive if it solves real problems. Open Banking succeeded not only because it was secure, but because it made life easier. We must focus on everyday use cases that save time or money. For individuals, tasks we often delay could become significantly simpler. Imagine transforming complex, stressful processes, like paying bills, into seamless digital experiences: no more piles of paperwork at the kitchen table. Rolling out services that touch millions of lives takes time. But the benefits are enormous.”
Benefit the many, not just the few
Mick McAteer, founder and co-Director, the Financial Inclusion Centre
The Financial Inclusion Centre is a not-for-profit policy and research group that promotes financial markets that work for society
“At the Financial Inclusion Centre, our concern is: how can the potential adverse consequences of Smart Data be managed, to make it work for vulnerable and excluded consumers - not just benefit more advantaged consumers?
Consumer outcomes depend on: consumer power (a function of economic power and capability); market practices; and the ‘rules of engagement’ set by policymakers and regulators.
Financial services are built on segmenting consumers into high-low risk, high-low profitability, and high-low power groups. Segmentation is a primary cause of exclusion and discrimination; and individual consumers with limited power are much more vulnerable to exploitation in markets. Tech doesn’t change market tendencies to segment, discriminate, and exploit. Indeed, tech allows firms to do so with even greater efficiency at both a mass market and granular level, and in real time.
If Open Banking is anything to go by, Smart Data could just enable markets to offer even better deals to empowered, commercially attractive consumers across a wider range of services; and more efficiently discriminate against vulnerable, less commercially attractive consumers.
If Smart Data is to benefit the many, not just the few, guardrails will be needed to prevent further exclusion. Trusted intermediaries could also intervene to harness collective consumer power and use data to make markets work for individuals with less market power. Finally, policy interventions such as social tariffs will become even more necessary.”
Test and learn with confidence
Andrew Self, Head of Open Finance and Banking, FCA
FCA is the Financial Conduct Authority, and regulates financial services firms in the UK
“With open finance, consumers can choose to safely share financial information, like bank or savings details with trusted services that can offer better, more personalised support. We are committed to putting the right safeguards in place as smart data develops.
Creating solutions that truly work for everyone means working together. It takes collaboration between financial service providers, innovators and everyday consumers to build inclusive, transparent solutions that meet diverse needs. Engaging with other regulators and market players across different sectors and countries, we want to develop rules that encourage innovation while always putting consumer safety and data privacy first.
We recently launched the Smart Data Accelerator, which is a way for all those with ideas, to test practical uses for smart data. Through this we will develop real examples of how smart data can improve financial services in a safe environment, with a chance to build in the consumer protections at an early stage. Alongside this we will think about how we ensure wide adoption of beneficial innovations.
By March 2026, we plan to publish more detail on how to make open finance a reality, alongside the government and regulators.”
Set the right standards and follow-through
Three clear themes emerge across these perspectives from industry, civil society and regulator:
- Open finance schemes must take a holistic approach across participants, and of the impacts of the scheme - including the risks of driving and exacerbating social or economic exclusion.
- Use-cases must add real everyday value to consumers, including vulnerable consumers.
- Consumers must trust the businesses and organisations they are dealing with, and the safeguards that are in place for them.
This reflects the findings of our policy research on consumer risks around Smart Data: that without the right protections in place, smart data schemes such as open finance present risks to consumers. These include poor quality products and services, lack of meaningful consumer consent, risks to consumer safety, and the exploitation of vulnerable consumers.
To address this, we developed a principles-based trust framework for smart data schemes that puts consumer consent and control at the very centre. We believe this model can help smart data schemes in the financial services sector develop in the right way. Our governance principle embeds clear accountability and liability alongside robust redress mechanisms, which can support high-quality products and services; and monitoring of consumer outcomes which can help mitigate risks of exploitation or exclusion. Our scalability principle includes accessibility for diverse communities; and a common language so that consumers have a seamless experience across schemes - supporting clarity and efficiency. Our protection principle includes protection against cyberattacks and data misuse, so consumers feel confident about making their data available. These principles can be implemented through appropriate design standards and technical standards: but, as we have argued with pensions dashboards, it is crucial that these standards are enforced effectively.
Explore Which?'s trust framework to learn more on how to put consumer trust at the heart of future smart data schemes. This article is part of our new blog series examining the role of smart data in shaping society, the economy, and the digital future. If you missed it, catch up on the previous articles on open energy and on lessons learned from open banking.