Today is the 10th anniversary of ‘International Open Data Day’, the annual celebration of open data all over the world. It’s an opportunity to promote the benefits, along with general awareness, to encourage the adoption of open data policies in government, business and society.
Therefore, it’s as good a time as any to reflect on how an initial idea to create an open data culture has transformed into a global movement, enabling our choices, fuelling economies, informing our decisions and shaping our ideas.
Over recent years, we have started to see the introduction of new, exciting initiatives born out of the notion of open data, most notably the launch of open banking just over two years ago in the UK. This occurred due to two key emerging pressures - the consumer demand for personalised services and regulators recognising that free-flowing data benefits both people and the economic strength of the country.
New regulatory frameworks have also been implemented that mandate data sharing; Payment Services Directive (PSD2), Energy Efficiency Directive (Smart Metering) and Software Directive (Interoperability), all geared to determine how we transfer data in a protected way.
Despite a relatively slow start for open banking, significant progress has been made, with several innovative personal finance management tools emerging, helping people manage their money more effectively with the extra insight provided.
As a result, there’s been a marked increase in people using open banking services in the last 12 months. In January 2020 there were 321 million data sharing requests, over 10 times more than the 23.1 million recorded in January 2019.
Experian is behind many of the Open Banking services you see today, processing approximately 1 in 4 of the successful Open Banking API ‘calls’, when people consent to share their bank account transaction data.
The credit 'invisibles'
As well as providing greater choice and convenience to customers, open data, along with other new data sources, can also be particularly helpful for building out the financial records of the ‘credit invisible’ population — people or businesses with little or no viable financial information to draw upon — helping them to access both mainstream finance and crucial public services online.
Our research found there are 5.8 million people in the UK who are virtually invisible to the financial system, because there is insufficient information about them to make informed decisions. These thin- or no-file consumers are generally excluded from large parts of the financial market, reducing their financial options, which in turn increases their cost of borrowing and cost of living.
By adding new data sources, such as data from utility companies, along with open banking data, we estimate that we can reduce that thin-file population by 1.5 million people.
It's a similar story for more than 1.6 million UK businesses too. But when open data is considered, there’s potential for around 300,000 SMEs, that would have previously struggled to access credit due to lack of information, to see their business credit scores improve.
The next stage of this journey is helping more people to contribute their own data directly to their credit files and improve their credit scores. This will enable them to get access to more affordable products and services, by building out financial track records with relevant financial data, helping lenders to understand credit risk in a way that is fit for purpose in a rapidly changing marketplace.
Power to the people
The likelihood is open banking will continue to transform money management for people and small businesses by offering innovative product and services that provide them with a simpler, more secure ways to gain control over their finances.
However, applying the same API technology that underpins open banking to other areas, such as utilities, also has the potential to benefit consumers even further. Having all their information in one place would allow them to make smarter, more informed decisions, leading to higher engagement and, most importantly, less stress.
A new generation of technology that embraces the concept of open data could also conceivably connect individual energy use with the demands of the overall grid, better integrating people’s energy consumption. By encouraging the entire sector to formalise a more open approach to the data it holds on their customers could open up people’s ability to leverage smart meter data to their advantage.
This would allow, in theory, for home and business owners to adjust their energy use according to the supply and demand on the grid for more responsive, and transparent pricing.
Just with the banking sector this would require energy companies to open up their data via a set of standard, secure application programming interfaces (APIs) that could access and leverage these new data streams, ideally driving more switching and bring new, innovative energy services into the market.
Organisations across all industries should recognise the benefits of investments in open data technology. Not only does it create an environment for consumers to use their information to access services tailored to their needs, it can also give businesses a significant competitive advantage.
Jonathan Westley, Chief Data Officer at Experian