Aim: To create a global centre for smart economy networks
Future economic growth will come from smart data and networks. Countries that embrace this next wave of efficiency and effectiveness will prosper by increasing productivity and trust, while reducing cost. The UK is uniquely well placed to do so by being at the leading edge of the development of data ‘rails’ and standards.
Smart economy networks
The economy of the last 20 years has been driven by mobile, social platforms, and the cloud. The next 20 years will be driven by smart economic networks based on artificial intelligence, open data, and shared ledgers. Value will be created by digitisation of assets and contracts combining different types of high-quality data.
Fundamental to success will be enforcing the principle that an individual owns and controls their own data – and should be able to access it, give third parties the permission to access and combine their data from different sources, and share in economic value derived from their data. Open banking in the UK has been an early, partial example of this. Seven million users of open banking benefit from the ability to access and port their financial data in real time, supporting payments, account switching, and innovative services that bring together financial data from various sources and enable intelligent management of finances.
Open banking is just the foothills of a smart data economy. For example, combining an SME’s financial data with their smart meter energy readings and public data about their premises could provide targeted finance to unlock their own Net Zero transition: identifying and enabling the right finance for the best Net Zero path and solution for their particular business.
Underpinning this we need standards and infrastructure. Flows of data become the lifeblood of our economy; and standards are the heart that powers this. These standards need to be international for global trade to flourish. To date, individual territories have developed their own open banking and open data standards. In the UK, the OBIE/OBL has set API stands for open banking, which has provided the basis for payments innovation. Future trade and transactions will depend upon international interoperability – underpinned by international standards, ISO standards. The UK has an opportunity to export our know-how in this area and lead the way in developing international standards with our international partners.
The UK also needs ‘infrastructure’, software not hardware. We need more shared data spaces, perhaps using smart ledgers, where data can be safely exchanged, and those exchanges reliably validated.
The future of the City of London will be based on smart economic networks, for example:
- Payments is a leading example of ‘getting smarter’ economic networks, with account-to-account open banking solutions enabling people to securely and easily pay for services and goods.
- Government services, especially taxation, customs, and trade, need to be economic and efficient using smart economic networks.
- We can expect retailers like Amazon to embrace open finance payments with direct account-to-account replacing payments on card or direct debit.
- Consumer passports, providing digital identity infrastructure, will increasingly be part of network solutions in health, finance, and trade.
- Increasingly financial audit will be underpinned by real-time data ensuring better, cheaper, faster audit.
- Increasingly testing, inspection, and certification will be underpinned by real-time data providing quality assurance not only of companies but also of supply chains.
- Smart economic networks enable new types of trade finance; support the trade in digital services; and provide supply chain tracking for physical trade on goods, in turn providing numerous ESG tracking solutions.
- Drawing upon different sources of data, insurers, with customers’ permission, can enable more accurate risk assessments and pricing, from household to multinationals, bring much-needed finance into transactions that increase trade.
- Just as law firms are adopting AI, so effective and efficient legal research will be enabled by access to a client’s data with other organisations – further enabled by ’smart contracts’ as legal title takes the form of digital assets.
- As capital markets become increasingly digitised & tokenised being able to combine and analyse data to allocate risk appropriately will increase economic efficiency in the use of capital.
- All of the UN Sustainable Development Goals would be accelerated if smart economic networks were ubiquitous – from reducing hunger to climate change to stronger and safer institutions.
We want to kickstart the development of international standards in this area. Technically, we would be looking at demonstrating live use of document standards and interchange standards, largely based on the underlying https://x-road.global/ infrastructure. We will convene interested institutions and organisations to pilot the development of standards in a few key areas.
Proposal in a nutshell
The 695th Lord Mayor elect has convened City and global institutions to develop international ‘open data’ standards (enabling cross border data-driven services, powered by APIs), initially in a small number of areas where open data is already most advanced and where the incentive and opportunity for cross-border services is greatest. This work is in line with the City of London’s “Vision for Economic Growth – a roadmap to prosperity”: creating the framework for a digital-first economy, enabling data-driven sustainable finance, and connecting innovative networks across the world.
Participants and roles
- Worshipful Company of World Traders – https://world-traders.org/ – steering committee & governance
- City University – https://www.city.ac.uk/ – programme manager
- Demos – https://demos.co.uk/ – digital identity infrastructure interests
- Z/Yen – https://www.zyen.com/ – digital identity and smart economy network interests
- Estonian Embassy – https://london.mfa.ee/ – use of Estonian know-how and X-road – https://x-road.global/
- Mattereum – https://mattereum.com/ – digital asset verification (more background, “Smarter Contracts” report by Sir Geoffrey Vos – https://www.judiciary.uk/wp-content/uploads/2022/02/Speech-MR-to-Smarter-Contracts-Report-Launch-Lawtech-UK-UKJT-Blockchain-Smart-Contracts.pdf, https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2021/11/Smart-legal-contracts-accessible.pdf)
- Chartered Institute for Securities & Investment (CISI) – https://www.cisi.org/ – markets and AML interests
- Association of British Insurers (ABI) – https://www.abi.org.uk/ – financial verification
- Confederation of British Industry (CBI) – https://www.cbi.org.uk/ – productivity
- UK Finance – https://www.ukfinance.org.uk/ – financial verification
- Innovate Finance – https://www.innovatefinance.com/ – financial verification
- Centre for Finance, Innovation and Technology – https://cfit.org.uk/ – bringing UK standards international
- United Kingdom Accreditation Service – https://www.ukas.com/ – sole national accreditation body for standards
- HMRC – https://www.gov.uk/government/organisations/hm-revenue-customs – trade & supply chain verification demonstrator
- Lumera – https://lumera.com/ – pensions administration demonstrator
- Nickel Digital – https://nickel.digital/ – fund management demonstrator
What we are proposing to demonstrate
Initial areas we believe may be most fruitful are:
- Trade & supply chain verification (HMRC)
- Pensions administration (Lumera)
- Fund management (Nickel Digital)
- Collaborative APP fraud and credit risk reduction (Estonia – Mifundo, Salv)
- Hyperroute – standardised information requests are routed by a user’s device, with their consent, between certified organisations using pseudonymous identifiers, claims, or tokens that convey identity, payment, and other information while preserving privacy and minimising fraud (Demos)
Looking ahead we can see some other possibilities in ‘verticals’ such as energy usage, telecoms, health, aviation, maritime, and many areas of finance. We can also see a number of ‘horizontals’ beyond the first phase of demonstration:
- Payments – including data on fraud and verification
- Identity – providing digital identity exchange infrastructure
- Notarisation – timestamping and document authentication
ANNEX – some background on previous work in smart economy networks and identity:
|Information Rules: Smart Ledger Architectures & Distributed Permissions||Maury Shenk and Professor Michael Mainelli||2018||Long Finance (November 2018), 63 pages.|
|The Economic Impact Of Smart Ledgers On World Trade||Douglas McWilliams, Cristian Niculescu-Marcu, & Beatriz Cruz of the Centre for Economics and Business Research||2018||The Worshipful Company of World Traders & Long Finance (April 2018), 77 pages.|
|To Be, To Have, To Know: Smart Ledgers & Identity Authentication||Hugh Morris||2019||Long Finance (February 2019), 89 pages.|
|Capacity, Trade & Credit: Emerging Architectures For Commerce & Money||Professor Michael Mainelli, Stephanie Rochford, Chiara von Gunten||2011||City of London Corporation (December 2011), 203 pages.|
Also, the IDChainZ prototype developed in 2014 and delivered in 2017 – http://www.idchainz.com/