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In a world where everything's a transaction, trust is essential

As the prevalence of the internet and digital technology continues to grow, more and more interactions are becoming digital. And digital interactions are predicated on the exchange of data. In recent years it has become clear that whilst personal data has grown in value, the benefits are rarely being felt by the providers of the data. Instead, a small group of commercial companies are increasingly able to control and monetise our data.

Shikko explains, "We believe that every digital interaction should become a transaction where you provide your personal data and get something in return. But there is clearly a 'data benefits imbalance' where we as individuals are not accruing a fair share of the benefits from supplying our data. And as awareness of this imbalance grows, we see that trust begins to erode. Consumers recognise that they are losing control over how their personal data is used. And this decline in trust will make it much harder to grow a sustainable digital economy because it signals a worsening relationship between businesses and their customers. Less data will be shared, and less data leads to less relevance, fewer customers and diminished business success. The question now is what we do about this."

Digital Sustainability will ensure a fair 'data' future for everyone

Central to INNOPAY's belief system is the ambitious concept of Digital Sustainability: the idea that we should focus more attention on combating the unintended negative effects of the explosion of data transactions, and making sure we do not create a digital world which is every bit as 'polluted' as the physical one.

Much like environmental sustainability in the physical world, Digital Sustainability is a broad concept which covers how we should respond to a range of different threats. Data becomes 'polluted' – leaking, fragmented, sometimes inaccurate and, most importantly, outside the control of the people and organisations which create it and who are the subjects.

Shikko continues, "Whereas it took over 100 years to reach a crisis in the physical world, we are approaching the tipping point much faster in the digital sphere. One of the key tenets of Digital Sustainability is to ensure that we promote 'data sovereignty'. This is all about having a much more democratic approach to data, to ensure that people have the choice about how their data is shared, who has access to it, and how they can use it. Now we must jointly decide on new governance models that will not only protect this data, but also rebalance the data benefits in a fairer way. Not unimportant: we also need to educate people about data, just as we educate them for traffic, payment and social media behaviour.”

"We need to find business and public 'heroes' who are unafraid to take the initiative and embrace the need for Digital Sustainability. I believe this will happen because visionary leaders will see that not only is this the right thing to do, it's also smart because it offers companies a first mover advantage. There is currently an opportunity to turn Digital Sustainability into a USP. For example, an organisation can take the first step by developing a Digital CSR policy which openly demonstrates that they provide data sovereignty for their employees, partners and customers. In practical terms this means offering functionality for viewing, managing and sharing each stakeholder's data.”

Data sovereignty makes good business sense if implemented correctly

Data sovereignty is a key component of ensuring that we create a digitally sustainable world. In Shikko's words, it is 'the right of people and companies to have control over data which concerns them'. And not only is this an altruistic desire but it also makes hard business sense. If customers become more reluctant to share their data, companies will lose out.

"If there is no trust," explains Shikko, "then data will begin to turn from an asset into a liability. We will see a growth in additional security and compliance measures which will increase the cost per transaction. And it will also become more difficult to innovate and disrupt. Take the example of the insurance industry. If you want to create a disruptive type of car insurance, you will need to use data you already hold from existing customers. But what if you could also access data directly from car manufacturers, with the consent of the driver? This would really change the game because you could base product development decisions on a much wider array of data. But then the questions become 'how are you going to responsibly manage all that data?' and 'how are you going to support effective data sovereignty for all your stakeholders?'."

Shikko believes the answer lies in the implementation of effective 'trust (or soft) infrastructures'. The internet is currently well-suited to supporting transactions at very large scale. However, it is less well-equipped to provide trust, hence today we see large and growing (private) institutions turning data into trust for brokering social and commercial transactions. We need to move from ‘institutional’ trust to ‘infrastructural’ trust. The trust infrastructure is like a layer which sits on top of the internet; a type of 'glue' which supports the development of a decentralised ecosystem of data sovereignty environments. If you want to travel by train, you need physical (hard) infrastructure such as railways and stations. In the digital realm, if you want to enable the movement and reuse of data in a secure and manageable way, the trust infrastructure enables this through decentralised standardised ways of working together in functional, legal, technical and operational terms.

INNOPAY has practical experience of facilitating these trust infrastructures through its work with organisations like the Data Sharing Coalition and iSHARE.

"First we find organisations which are willing to form coalitions to find collaborative solutions to solve data sharing use cases. We don't believe in pushing big solutions and hoping the market will accept them. Instead we look for pioneers at national or sector level, and focus on how different solutions can be harmonised and made interoperable to protect and govern data in the right way. We look for 'heroes' who believe it is important to create a better digital world, whilst also seeing clear business advantages."

Is the European Digital Identity Wallet a good step towards data sovereignty?

Private sector organisations will play a crucial role in ensuring the development of data sovereignty. But they cannot achieve this alone, and the role of national governments and the European Union will be important in driving progress. As the EU Commission continues to implement its Digital Agenda for Europe – and specifically the RFP (Request for Proposal) for the European Digital Identity Wallet which is due later this year – INNOPAY is looking for dynamism and openness from the EU.

"I think the EU Wallet – as a type of trust infrastructure that empowers people to control parts of their personal data – will be a good step in the right direction. It must be designed and implemented effectively, and this means taking a decentralised approach rather than a one-size-fits-all solution. Harmonisation and convergence of existing solutions and practices is the key. Also it's essential that we don't limit ourselves to personal data only, because data sovereignty is equally important for industrial and business data. The market is already offering lots of different bespoke solutions, and local companies may be better-equipped to create appropriate components for the wallet. There is also a concern that geo-politics may play a part and we might end up with only those parts which everyone can agree on.

"The Wallet will also be useful if it creates a move in the market and encourages people to think about these types of sharing networks. Hopefully it will spark a new type of innovative thinking. And this should result in private companies introducing their own (interoperable) wallets into the marketplace. This could set up a new paradigm by developing the commercial market which we need if companies are going to invest in developing these types of products. But speed is of the essence … we need to move fast."

The EU needs to move fast and hard as it rolls out the Digital Agenda

Shikko believes Europe is now drinking in the 'last chance saloon' in terms of wrestling back control of our data from the Big Techs.

"We are losing the war for control over our data. Just look at how Apple and Google were able to dictate who was able to use their APIs (Application Programming Interfaces) for the COVID-19 tracing apps. The telecom sector is now effectively controlled by Chinese companies. This is not a data democracy but instead an autocracy by a handful of companies. The EU needs to act fast and take on the role of 'hero' as it rolls out the Digital Agenda. This really is our last chance to take control of our data. Just as GSM was created as a decentralised telecom paradigm, we now have a similar opportunity for decentralised data sharing. If we fail, we will be nothing more than spectators on data sovereignty."

So what should the EU Commission do in practical terms? "We need to fight the battle on many fronts, not just the regulatory part. The EU needs to spark the market by giving clear direction on decentralisation, harmonisation and standardisation. The challenge is not really about technology; it's more about the effective coordination of private and public actors. Policies should focus on enabling all parties to work together. The recent Gaia-X initiative is an example of this. Let's see more investment in universities and education strategies about data sovereignty. Let's see incubation subsidies for start-ups working on trust infrastructures.

"We need to make sure the private sector is fully involved. Building these infrastructures will only work when public and private organisations are working hand-in-hand. We need to see a much more market-oriented plan where public and private organisations come together to create the building blocks for the trust infrastructures which will help take back control from the Big Techs.

"And we need to focus on enabling companies to access the whole European market, not just local markets. We already showed this is possible with SEPA and eIDAS. Our competitors have access to huge markets like the US, China and India. As long as we are only competing for a fragmented marketplace in Europe, we will never win."

"Finally, we need to move faster, and we need to deliver solutions which are demonstrably better, cheaper and easier to use than our competitors. That's the challenge. As the saying goes, 'Winning isn’t everything; it's the only thing'. There will be no second place in the battle for data sovereignty."

To discuss the challenges and opportunities discussed in this article, feel free to contact Shikko Nijland.