Providing data
Mathematician Clive Humby’s 2006 declaration that ‘data is the new oil Opens in a new window’ has been the subject of much debate and – excuse the pun – refinement. But few can doubt the significance of data to the 21st century economy. It drives the business models of some of the world’s most valuable listed companies, such as Alphabet, Amazon, Apple, Meta and Microsoft. If we accept that data has value, then questions around who owns data, and who can access and use data for various purposes, are important but complex.footnote [12] And these questions lie at the core of how competition works in the digital economy, since ‘data may affect market structure toward greater concentration by creating barriers to entry that stifle competition Opens in a new window’.
When governments or companies make their data available to others outside their organisations, they enable the development of new products, services and business models in a wider ecosystem. This could involve app developers accessing live public transport data, to serve up bus times and journey planners in a user-friendly way. Or it could mean analytics firms accessing operational data to train machine learning models to predict when a wind turbine might fail. But it is not enough to just provide access to data – for third parties to leverage the full potential of data, data sets have to be usable or ‘liquid’. Four factors contribute to this: access, machine readability, cost, and rights to reuse or redistribute data Opens in a new window.
The economic potential of open data is a relatively new area of study. A McKinsey report into the potential value of open data in seven global industries estimated it at more than US$3 trillion a year. This is driven by the power of open data to facilitate entrepreneurship as well as ‘helping established companies to segment markets, define new products and services, and improve the efficiency and effectiveness of operations Opens in a new window’.
With this in mind, the Bank will consider two big opportunities for open data in the digital pound. One opportunity is opening up macro-level data about use of the digital pound system and the economic activity happening across it – with the important caveat that all user data must be aggregated and anonymised across the population of CBDC users, to protect user privacy. This could be beneficial for a broad community of analysts who want to analyse payments and economic trends and glean insights into, say, opportunities for new digital products or developments in ecommerce. The digital pound could provide a high-quality, large-scale, privacy-preserving data set for digital companies to use to inform product development or train models – replacing (and improving upon) synthetic data.
The second opportunity is for an Open Banking style approachfootnote [13] which could require PIPs to help users share their CBDC data with other PIPs, and with ESIPs. This would aim to promote a competitive market of digital pound service providersfootnote [14] and help avoid a market structure whereby a large PIP entrenches its dominant position through control of valuable user data. We have already noted that network effects are at play in payment systems, and ‘with data there are extra network effects. By collecting more data, a firm has more scope to improve its products, which attracts more users, generating even more data, and so on Opens in a new window’. The design phase of the digital pound project will therefore consider whether open data could help to facilitate a wide range of businesses to harness data to design new, tailored and innovative products and services for end-users – and not just for their own, existing customers. Should the Bank decide to pursue an open-data approach for the digital pound, it could also set standards to ensure that data is ‘liquid’ by design. Any initiatives to harness digital pound data must meet the Bank’s principle to protect user privacy and give users control over who they share data with.
From: Enabling innovation through a digital pound | Bank of England.
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