The UK Government has introduced the Digital Information and Smart Data Bill, focusing on legislation for digital identification.
The legislation aims to establish digital verification services, including digital identity products, to enable people to quickly and securely verify their identity when using online services. This initiative was announced during the King’s speech yesterday, marking the formal start of the parliamentary calendar.
Many leaders in the tech and fintech sectors were eagerly anticipating the King’s mention of the Bill, among the 35 pieces of legislation he addressed. Their excitement stemmed from the previous version of the Bill, which was dropped during the last wash-up period.
The removal of key proposals supporting digital verification had left industry leaders disappointed, prompting them to urge the new government to recommit to advancing digital verification in the UK.
Digital ID is not a new proposal in Britain, having been a key project for Tony Blair’s Labour government in the mid-to-late 2000s. It was ultimately scrapped by the Conservative-Liberal Democrat coalition in 2010, but appears to be making a resurgence under Keir Stamer – despite recent reports that Labour had rejected calls from Blair to refocus on digital ID.
What will the Bill establish?
Firstly, the legislation will introduce the National Underground Asset Register (NUAR), a digital map offering standardised, secure, and immediate access to data on underground pipes and cables. This aims to transform their installation, maintenance, and repair processes.
Secondly, Digital Verification Services will be established to simplify everyday tasks such as moving house, conducting pre-employment checks, and purchasing age-restricted goods. These services will utilise secure and trusted digital identity products from certified providers.
Additionally, Smart Data Schemes will facilitate the secure sharing of customer data with authorised third-party providers. This aims to enable enhanced services, improve decision-making, and lead to greater engagement across various markets.
Moreover, the UK data economy, which represents 6.9% of GDP, plays a pivotal role in boosting trade and supporting business operations. Data-enabled exports alone were valued at £259bn in 2021, underscoring the economic significance of robust data infrastructure and regulatory frameworks like those proposed in the legislation.
The government believes that all three initiatives are crucial for advancing the UK’s digital future. Assessing the legislation, it is clear that the latter two hold particular significance for the payments and fintech sectors.
For instance, Smart Data schemes, inspired by Open Banking, hope to empower consumers and stimulate economic growth through informed choices and business innovation.
Labour seems to be continuing the efforts of its Conservative predecessor in this space. The previous administration envisioned a scalable framework adaptable to future technologies, outlined earlier this year when it formed a Smart Data Council.
Drawing inspiration from Australia’s Consumer Data Right, the government planned at the time to start with a limited number of open data sets and gradually expand the scope.
More than likely this approach has not changed. It looked to combine the recommendations from the Future of Payments Review and initiatives led by the Centre for Finance, Innovation and Technology (CFIT) and the Joint Regulatory Oversight Committee (JROC).
Leaders in the UK feel as though it is a global leader in Open Banking, and this legislation will be critical in setting the stage for the future of finance.
Digital verification is a concept that has made appearances in the past. The UK government has been striving to establish a reliable digital verification system for several years, with one of its most notable attempts being the Verify project.
Introduced in 2013 by the Government Digital Service, Verify faced severe criticism from bodies like the National Audit Office and internal Parliamentary committees. It was condemned for consistently missing its targets and ultimately deemed a failure by the public, marking a significant setback in digital verification initiatives.
With this failed attempt in mind, a lot has changed since then and developments in the European Union (EU) may be one of the main reasons the government is looking to accelerate this legislation.
Recently, the Digital Identity Regulation entered into force in May 2024, designed to address the challenges of digital identification within the European Union. Under this regulation, every EU Member State is required to offer at least one EU Digital Identity Wallet to all citizens and residents by 2026.
A Digital Identity Wallet is undoubtedly the ultimate objective, not just for the EU but globally. The concept revolves around individuals storing and using all their information – such as passports, driving licences, and credentials – digitally, eliminating the need for physical documents. This idea was talked about at length during the Money2020 event in Amsterdam.
Currently, the government is prioritising the immediate impacts of the Bill, as the new PM aims to swiftly make a significant difference. The government has highlighted that Digital Verification Services are anticipated to save time and money for individuals and businesses alike, projecting that secure digital identity could potentially yield £600m annually.
Industry comment
While the payments and fintech sectors welcome this legislation, it’s evident that there remains considerable work ahead as emphasis by Chris Michael, CEO and Co-founder of Ozone API.
“As the UK sees in a new Government, the UK’s open banking and smart data initiatives are at an important inflection point. Recently, the then Conservative Government launched policies including a Smart Data Roadmap and a new open finance taskforce, under the Data Protection and Digital Information Bill (DPDI),” Michael commented.
“These were certainly signals that policymakers have heard industry calls for better frameworks to be put in place around open banking and finance specifically. But there’s a long way to go for the open data economy to be realised and the new government must keep up this momentum to avoid losing progress.
“Ultimately, what we should be working towards is a single global framework for open data. That’s a gargantuan task but its impact would be huge. The Open Wallet Foundation, the Open Data Institute and the OpenID Foundation are all doing some great work in this space, but the challenge remains that ‘open’ is not the best term to use with consumers, as it incorrectly implies a lack of data privacy and governance.
“As we extend open banking into open finance and ultimately the open data economy, one of the big challenges is that more and more regulators must be involved. It’s great that we’re seeing more support across government, but policy gridlock has so far held it back. We need one body to take responsibility for moving this forward – and the new government has a unique opportunity to do so now, helping the UK take the next step on this journey.”
