EU Could Take Cues from British Open Banking Rules

As the European Union embarks on a journey to create a European strategy for data that will create a “single market for data,” one of the only things you can say for certain is that data experts capable of regulating and helping companies comply with those regulations are going in high demand.

The legislation is designed to do far more than tell companies what they can and cannot do, according to Juan Delgado, director of the Chicago-based Global Economics Group, told PYMNTS recently.

“The intention of this regulation is to create a big pool of data that every company can use, all over Europe, in order to create their own products and to innovate with new data products,” Delgado said.

What the EU is doing, he added, is “adopting two types of strategies. One of them is this idea of adopting specific remedies on data regulation for big tech companies. And then, simultaneously, they’re trying to create a single market for data” — that big pool.

That said, Delgado said it “is not very clear what we mean by a single data market for data.”

Data, he argued, is not a commodity. “Data cannot be pooled without identifying what kind of data we are putting in the pool, and without identifying the competition concerns that this data can create — in the sense that data can be a collusion tool. By sharing data, companies can anticipate the behavior of their competitors.”

That would be bad for competition, Delgado said. But most importantly, he added, sharing any consumer data comes with serious privacy and data protection issues. That, in turn, means that every single piece of data has to be scrutinized to see if it will create collusion and that it does not infringe the broader privacy and data protection regulations imposed by the EU’s General Data Protection Regulation.

Developing this legislation, he said, “requires a lot of filters.”

It also requires a lot of industry-specific customization and expertise, Delgado said.

“The role of data and the dynamics of competition is going to change from industry to industry. He said that credit and payment transactions are not relevant for health companies, for example, or for insurance companies,” he said. “The idea is that for each sector, you have to specify which data is relevant for the dynamics of competition.

Open to advice

That’s an enormously complex undertaking, Delgado warned. One good place to look for ideas and precedent, he said, is the U.K.’s open banking regulations. That places an obligation on the nine largest banks to share certain data and payment and credit information — with qualified agents of their competitors and would-be market entrants like FinTech companies.

“Qualified” is the keyword there.

“Not everyone has access to that data,” he explained. And it can only be used for certain, specific purposes. More than that, he said, the rules that define what data has to be shared are always changing.

Delgado said that the regulations must be “dynamic in the sense that it is not always the same pieces of data that plays the same role in the competitive space,” Delgado said. “Some payments data might be important in order to promote the emergence of new payment systems, but as the industry evolves and there are new companies — new FinTech and new products — then some other data might become relevant in order to compete in this market.”

That means establishing “a very detailed mandate that this specific data has to be shared because this data is crucial to promote competition and innovation in this particular industry — in the payments and credit industry.”

That, in turn, makes a periodic revision of the regulations necessary, said Delgado. “You not only need to have a very carefully designed piece of regulation, you also need to follow up that regulation in order to make sure that it remains effective when the industry evolves and changes, and other pieces of data become relevant.”

This means you need people who know not only where the industry is but can gauge where it’s going. And instead of needing them just for banking, you need them for big tech companies and any other industry or industry segment in which data can be a barrier to entry.

With that in mind, the regulator likely cannot be one super-regulator, Delgado said.

“That means that we probably need lots of micro-regulators, like in the case of the Open Banking regulation, in order to implement data regulation in different industries because,” he said, “there is no data as a commodity.”



About:More than half of U.S. consumers think biometric authentication methods are faster, more convenient and more trustworthy than passwords or PINs — so why are less than 10% using them? PYMNTS, in collaboration with Mitek, surveyed more than 2,200 consumers to better define this perception versus use gap and identify ways businesses can boost usage.