Safeguarding Innovation through Data Governance Regulation: The Case of Digital Payment Services

Abstract

The expected economic and social benefits of data sharing are enormous. Yet particularly in the B2B context, data sharing of privately held data between companies has not taken off at an efficient scale. This has already led to the adoption of sector-specific data access and data governance regimes. Despite the potential welfare enhancing effect of further regulated data (re-)use however, it is crucial to assess the potential adverse effects that may be created by too broad data access regimes. Not only the question of when but also of how access should be granted needs thorough consideration. Data driven innovation cannot be achieved by merely creating data commons, as this would ultimately bring back the discussion of further introducing exclusive rights in data. In this regard the paper firstly assesses the following factors that may determine the innovation capacities of undertakings: (1) Factual data exclusivity as investment incentive in quality data (2) Competitive markets detached from an industrial policy-driven market regulation that does not reflect data specific market failures (3) Pluralistic society as prerequisite for innovation that may be negatively impacted by the effects of too broad data sharing on consumer sovereignty and choice, and (4) Data-induced distortions of competition that may create both static and dynamic inefficiencies and reduce innovation competition. This will be done by taking recourse to basic IP and information economics and the EU competition case law pertaining to refusal-to-deal cases. Additionally it considers the rise of ‘surveillance capitalism’ and the current competition and data policy considerations with regard to both paternalistic data protection rules and the tackling of data-rich ‘undertakings of paramount importance for competition across markets’ in Germany. Against this reference framework the paper then analyses the sector-specific data access and governance regimes for digital payments services enshrined in the PSD2. Despite being primarily build as rights for bank account costumers, competitors offering the payment services need to get access to bank account information. The specific data governance framework already outlines the modalities of access and further (re-)use of data. The Delegated Regulation on Regulatory Technical Standards also outlines obligations on secure communication, provides for an opening up of specifications of APIs and defines certain data interoperability provisions. Yet there are still regulatory shortcomings that should be addressed and can serve as guidance for further data access and governance regulation. These findings are then reflected against the backdrop of the current EC’s data strategy.

Keywords: Open Data, data access, data strategy, data driven innovation, AI, economics of factual data exclusivity, competition law, algorithmic consumer, asymmetric regulation, PSD2, access to account rule, Big Tech banking, API standardization, semantic interoperability