I have come up with a brand new idea that will change the world as we know it.

I am going to call it ‘Open Digital’.

It will work like this. All the biggest online platforms would be forced to come together and agree to a framework of open-source APIs based on agreed standards. This will enable people to seamlessly transfer a continuous flow of their data to accredited third-party providers.

The benefits will be boundless. People will be empowered to control and earn from their data. New market opportunities will be unlocked. The digital markets playing fields will be so level they are hosting lawn green bowls events. Innovation will flourish. The UK tech sector will surge ahead of global rivals.

Sounds good right?

Some acknowledgements I have been advised to mention

OK, so the eagle-eyed readers may have noticed the name is familiar. Yes, I have partially borrowed some of the name of another relatively well-known regulatory intervention.

And yes, setting the name to one side, it is also true that the idea itself is not exactly brand new in this context. The idea of personal data mobility for digital markets has been around for some time and has been discussed in various contexts. It was a key pillar of the Furman Review’s plan for unlocking digital competition. It was subsequently discussed by the CMA’s market study into online platforms and digital advertising and the advice to the government of the Digital Markets Taskforce. But references have increasingly tended to be theoretical, with the feel of an academic exercise without great conviction.

Open Digital is no longer just a nice theory

Why? Well for starters I have given it a name, so now it must be a real thing. And I have used capital letters, so everyone will know it’s important.

There have also been a number of developments in recent years that suggest the stars are aligning, that conversations about Open Digital must now move from academic exercises to serious policy design. Some key developments include:

• Open Banking in the UK has officially arrived, and it turns out it’s pretty good
• The UK government is (finally) legislating
• Article 6 of the EU’s Digital Markets Act
• The Data Transfer Project has remained ‘in its early stages’
• Attitudes have changed, and people are ready to put their data to work

I explain my thinking on each of these below.

Open Banking is pretty good

Despite some of my early cynicism as to the likely real-world benefits, Open Banking is turning out to be a pretty good idea. In January this year the 6 largest UK banks finished implementation, and it now has over 6 million active users. Much of the world has been following in the UK’s footsteps in one way or another, and the UK’s fintech sector is a shining light, a beacon of positivity within an otherwise gloomy economic landscape.

[First minor caveat: for the purpose of this blog, I am ignoring the current uncertainty that hangs over the future governance arrangements for Open Banking, and assuming common sense will prevail in a timely manner].

London is a major global hub for fintech investment and growth. While the spurious title of ‘fintech capital of the world’ seems to be hotly debated, it is clear that the UK’s fintech sector is a success story, home to around 2,500 fintech companies¹ (London has more than any other global city²). It supports thousands of jobs, is driving innovation and growth, and unlocking new types of products and services relating to money and budget management just as they are needed more than ever. Open Banking has been an important catalyst for this progress.

In line with the original intention of Open Banking, there is also some evidence that the big banks are facing more competition. Challengers have continued to attract new customers and put pressure on the big banks. For example, Starling has over three million users, almost 9% of the UK market for SME banking, and predicts a quadrupling of profits this year.³ Importantly, the big banks have responded by modernising⁴ and looking to work with (or buy) fintech companies. Perhaps the strongest signal of a more competitive market came at the end of last year, with record numbers of people switching their current accounts since records began (376,000 people switched their current account in the last quarter of 2022).

Open Banking has been an important test case, and the results are surely in. Now it’s time to start rolling it out into other sectors.

What are we waiting for!? Well, legislation, for one.

Legislation is coming

Without new legislation, there hasn’t been an obvious implementation mechanism for rolling out Open Banking in other sectors in the UK. This has contributed to the feeling that the concept behind Open Digital might be a bit far fetched, a nice idea but nothing more. After all, Open Banking came from the CMA’s market investigation into the retail banking sector – we can hardly expect the CMA to undertake a market investigation that captures all our online activity. It would be a challenging scoping exercise to say the least.

But there is light at the end of the tunnel, as the government is bringing two new bills through parliament this year that could solve this conundrum.

[Second minor caveat: for the purposes of this blog, I am making the assumption of an orderly government that follows through on its commitments].

The first, which seems to have flown a little under the radar, is one element of the Data Protection and Digital Information Bill, which sets in primary legislation the potential for Smart Data Schemes (much like Open Banking) to be brought forward in other sectors. Although the impact assessment for the legislation talks primarily about schemes within the finance, communications, and energy sectors (all undoubtedly worth pursuing) there are also a few hints at the potential application to digital competition issues. 

On 17 November 2022, and serving as a perfect leaving gift on my final day at the CMA, the government announced its intention to bring forward the Digital Markets, Competition and Consumer Bill by a year to 2023. Once it achieves Royal Ascent, the Bill will bring into force the new pro-competition regulatory regime for digital markets, to be overseen by the new Digital Markets Unit (DMU). In addition to introducing codes of conduct for the largest digital firms judged to have Strategic Market Status (= market power + strategicness), the DMU will also have the power to impose a wide range of pro-competitive interventions (PCIs). It has been proposed that PCIs will be used to open up digital markets to greater competition, for example by mandating access to data, requiring certain APIs be made open-source, or by setting interoperability requirements.

Exactly how these two new bits of legislation will eventually interact is not clear – but it seems within one year the UK may acquire two potential mechanisms for implementing Open Digital. Spoilt for choice you might say.

Article 6 of the EU’s Digital Markets Act

The Digital Markets Act (DMA), which will formally apply across the EU from May this year, includes provisions for beefed up data portability rights. In particular, Article 6 requires that gatekeepers provide end users (and authorised third-parties) with effective portability of – and real-time and continuous access to – data provided or generated by the end users’ use of the gatekeeper’s platform.

On the face of it, this is a requirement for Open Digital to be implemented in the EU. But the devil will be in the detail – there are likely to be plenty of opportunities for the gatekeepers to attempt to obfuscate, add friction, or diverge in their approaches over time. Regardless this is extremely positive and, once implemented throughout the EU, the additional effort required to deliver Open Digital in the UK will be much lower (by the businesses and also politically).

Dominant incumbents don’t voluntarily remove barriers to entry

Google, Apple, Meta et al are likely to remind us that they are already working very hard on something similar called the Data Transfer Project, so there is no need for any meddling by those pesky regulators. This has been a useful and relatively effective strategy over the past five years.

The Data Transfer Project is a collaboration of some of the biggest and most capable tech companies (plus Twitter) along with a number of smaller partners to enable people to transfer their data directly from one service to another without hassle. It started out with grand aims of using interoperability and data portability to unlock innovation.

Unfortunately, there are a couple of ten-tonne-gorilla-sized problems with the project.

The first is that, 5 years in, to the naked eye at least, nothing much seems to have happened. Although it is officially ongoing, I am sceptical about progress.

There have been very few updates since the initial flurry of announcements in 2018.⁵ Apple joined; Facebook announced it could transfer photos to Google; that’s about it. Then in 2022, Google reportedly pledged its continued commitment to the project, with funding for [wait for it!] ‘hundreds of hours of our engineers’ time’ over the next five years.⁶ The website and github for the project do not inspire much confidence either, with a reference at the time of writing to the project being ‘in its early stages’.

Perhaps most revealing is the insights section of the github page, which shows data for the volume of contributions and frequency of commits to the code (example pasted below).

Aside from a curious blip in mid-2022, the data appears to suggest there isn’t a great deal going on.

The second, and arguably more important problem is that the incentives of the companies leading the project are not exactly aligned with the vision of competitive digital markets, nor are their collective visions likely to be greater than the sum of their parts. Perhaps they have discovered that they don’t want to transfer their data to each other, or that their rivals don’t want to reciprocate the arrangements. Even in a world where it is fully resourced and prioritised, a voluntary arrangement will never go as far as is needed, because the companies driving it (or perhaps parking is a better analogy?) don’t want it to.

So should we leave the fate of competition and innovation in digital markets in the hands of the Data Transfer Project? It’s probably not the right basket for our eggs.

People are ready to take control

People and regulators are wising up, sentiments are shifting, and markets are trying to respond as we would expect. With cookies on their way out, there seems to be a general acceptance that surveillance capitalism is on borrowed time.

As a result, there are audible creaking sounds as the digital advertising sector seeks new, more privacy-friendly alternatives. But regardless of what people want, attempting to take control of our data and our privacy is time consuming, frustrating, and too often ends in failure.

It seems to me that the only way of solving these issues without simultaneously crippling the advertising sector or burying everyone with consent banners, is through the success and widespread use of personal information management services. It was this strong belief that motivated my move from the CMA to Gener8, rather than the other way around.

Gener8’s experience to date has shown that people are increasingly recognising and ready to earn from the value their data holds. While over 90% of our users select rewards mode, many are then discouraged by the friction and delays imposed by platforms, and pointless requirements to repeat permissions on a regular basis. Although the GDPR made data management services such as Gener8 possible, further intervention is needed to realise their full potential. 

The potential upsides are tremendous

By launching Open Digital, we can unlock a whole new sector of third-party providers of digtech services. We can finally harness the potential of personal data management platforms like Gener8 and others that are emerging. We will take a big leap towards a more decentralised version of the web. And additional value will be unleashed through new services, apps and gadgets enabled by novel combinations of data and ever-advancing artificial intelligence.

With users permission, new third-party digtech intermediaries will connect to Open Digital data and provide individuals with personalised new services or insights. Maybe we will shift from uploading paper bills to using digital ID apps when we need proof of current or past addresses. Perhaps an app will nudge us to contact friends we have lost touch with. Or AI might independently plan our weekly menu and manage our weekly grocery shopping if it knows our preferences and it knows our social plans.

Other new services may be borne by gathering and aggregating users’ Open Digital data in anonymised form. For example, if enough location data was aggregated in real-time, it might facilitate new services relating to live traffic updates, the length of queues in shops, or which train carriage is the least crowded. Perhaps access to your social network could enable AI to manage sophisticated home security systems.

Data management platforms will enable people to earn real value from their Open Digital data in various value-creating ways. This might be in anonymised and aggregated form, with unique new insights sold to the market intelligence sector.

Alternatively, data management platforms may also intermediate between consumers and publishers to agree the terms on which people are willing to be served highly-personalised advertising. This consent-based model would be win-win for consumers and advertisers, while publishers such as news media outlets will be able to compete on a more level playing field with the major ad-funded platforms.

The debates around privacy vs competition will be consigned to the dustbin at last. If we place control and decision making in the hands of individuals, then competition and privacy will come willingly together, hand in hand.

Pro-competitive data access remedies tinged with privacy concerns? Forget them. Microsoft will be able to buy fully consented click and query data from individuals (via data management platforms) and enable Bing to compete with Google on quality. Potential new rivals to Facebook and Instagram will enter knowing that new users can bring their contacts or content with them.

Rarely can a single intervention claim to address so many complex interlinked problems.

There are admittedly some implementation questions to address

Once Chat-GPT had finished writing this blog for me, I asked it how we could implement an open banking type initiative in digital markets. In its typically confident style, it set out the following ‘basic’ steps that can be followed:

1- Developing a regulatory framework: The first step is to establish a regulatory framework that sets the rules and guidelines for data sharing, security, and governance. This framework should be designed to protect customers’ data while also promoting competition and innovation.

2- Creating a standard: A standard for data sharing should be developed that defines the technical specifications and protocols for data sharing. This standard should be open and accessible to all market participants, allowing for greater interoperability and compatibility.

3- Building an infrastructure: The next step is to build the infrastructure for data sharing, such as an API gateway and a directory of available data sources. This infrastructure should be designed to be secure, scalable, and reliable, ensuring that data is shared in a safe and efficient manner.

4- Encouraging participation: Market participants should be encouraged to participate in the open data sharing initiative. This can be achieved through incentives, such as lower costs or access to valuable data, as well as through education and awareness campaigns.

5- Monitoring and enforcement: The final step is to monitor and enforce compliance with the regulatory framework and standard. This can be achieved through regular audits, penalties for non-compliance, and ongoing efforts to improve the framework.

It’s doubtless an impressive answer. But unfortunately even I will have to admit there are likely to be some tricky implementation questions not fully acknowledged by Chat-GPT. How could it? These are completely novel challenges yet to be discussed or written about.

For instance, would the regulatory framework be implemented by the DMU through liberal use of its incoming PCI tool? Or would it require secondary legislation as a Smart Data Scheme, and if so, which government department would bring forward such legislation? Which body would oversee the scheme and act as the ‘implementation entity’? Which companies would be within its scope? And so on.

Tricky, but entirely solvable by humans if there is sufficient political will.

That can all wait for another day though. Until then, those of us with an interest in policy making can rest easy knowing we cannot yet be replaced by robots.

For now, let’s just celebrate that Open Digital has a name, and therefore, it is.

Get in touch
If you’d like to talk about Gener8, Open Digital, or anything related to competition in digital markets, I’d love to hear from you, either on LinkedIn or by email: [email protected]

References:

1- City of London Corp UK fintech factsheet. 
2- London is home to greatest number of fintech companies 
3- Starling Bank profits expected to quadruple this year. 
4- What banks have learnt from tech companies.
5- E.g. Facebook, Google and more unite to let you transfer data between apps. 
Google pledges $3M, engineering to expand Data Transfer Project behind Google Takeout.