The journey of open banking has been one of significant innovation, lessons learned, and evolving regulations. Now, as the UK gears up for the next phase with smart data, there’s an opportunity to build on the successes of open banking while avoiding its pitfalls. But what does it take to make smart data a success? Let’s explore how the evolution of open banking offers a roadmap for the future.
Smart data is the next evolution of open banking, designed to expand data-sharing principles beyond financial services. With the Data (Use and Access) Act 2025 (DUAA), sectors such as financial services, broadband, energy, and retail will be required to give consumers greater access to and control over their data. If executed correctly, smart data can revolutionise the way businesses and individuals interact with their information.
The trajectory of open banking shows that regulation plays a crucial role in driving adoption, but it must be designed to evolve. When open banking was introduced, certain regulatory hurdles—such as the requirement for 90-day re-authentication—created unnecessary friction for consumers. Even though the issue was recognised early, it took years to address, slowing adoption. With smart data, regulations must be designed with inbuilt flexibility to allow for continuous feedback from businesses and consumers. An agile approach will encourage innovation while maintaining necessary safeguards.
Mandatory participation and the adoption of common standards are other key factors that have contributed to the success of open banking. Without a requirement for all major banks to participate, adoption would have been fragmented, reducing the overall impact. The same principle applies to smart data—if industries aren’t required to take part, the benefits of an interconnected data ecosystem will be lost. Regulations must ensure that data sharing is not merely an option but an expectation—enabling businesses and consumers to leverage their data effectively.
Beyond regulations, the commercial model behind data-sharing initiatives is critical. Open banking faced challenges because banks were required to build rapidly and maintain APIs without a sustainable commercial model. Many banks saw it as a regulatory obligation rather than an opportunity, with no incentive to innovate or improve customer journeys. Smart data must avoid this pitfall by ensuring that businesses see clear commercial benefits. Whether through monetisation models, efficiency gains, or new customer experiences, the success of smart data will depend on strong incentives for all participants.
Stephen Wright, Head of Regulation & Standards at NatWest, emphasises, "The transition from open banking to smart data represents a pivotal moment for industries across the board. By leveraging the lessons learned from open banking, we can create a more flexible, secure, and customer-centric data ecosystem. The key to success lies in adaptive regulation, clear commercial incentives, and consumer trust."
Consumer trust has also played a significant role in the adoption of open banking and will be equally as crucial for smart data. Many people remain hesitant to share financial information due to concerns over security and misuse. The same hesitations will apply when it comes to data sharing in energy, telecom, and retail. To build trust, smart data initiatives must establish a clear and recognisable framework that reassures consumers regarding security and privacy. Simple consent mechanisms, transparent accountability, and a recognisable brand will all contribute to consumer confidence.
Another lesson from open banking is the importance of having a well-defined system for handling disputes. In cases of fraud, data misuse, or errors, consumers need a straightforward way to resolve issues. Open banking often placed the burden on banks, even when the issue originated with third parties. For smart data to succeed, there must be clear accountability across all participants to ensure disputes are handled efficiently and fairly. A strong dispute resolution framework will help create a stable and trustworthy ecosystem.
The potential for smart data is vast. It could revolutionise financial wellbeing, improve lending decisions, and streamline customer onboarding processes. Businesses will have access to richer customer insights, allowing them to create more personalised and effective services. However, with these opportunities come challenges, particularly as new players—including big tech and super apps—enter the market. Banks and other incumbents will need to rethink their strategies to remain competitive in an increasingly data and AI-driven world.
Ultimately, the success of smart data depends on how well we learn from the past. Open banking laid the groundwork for a more connected and data-driven financial system, but its journey wasn’t without obstacles. By applying those lessons—through adaptive regulation, clear commercial incentives, consumer trust, and robust accountability—smart data can avoid the same growing pains and achieve widespread success.
Rather than waiting for the perfect regulatory framework to be in place, businesses and regulators should take a proactive approach. The key to success lies in innovation, collaboration, and a willingness to test, learn, and iterate. If done right, smart data won’t be just an extension of open banking. Instead, it will be a transformative force across multiple industries, putting consumers firmly in control of their data and creating new opportunities for businesses to thrive.
