In September, another of the European Union’s landmark pieces of legislation, the EU Data Act, came into force. While GDPR transformed how companies manage personal data, the Data Act focuses on the access, use, and portability of non-personal and personal data generated by IoT devices and related services.

For the customer loyalty industry, which thrives on data, this regulation represents a fundamental shift. It promises to dismantle data silos, foster innovation, and empower businesses to select technology partners based on merit, rather than contractual constraints.

I see the Data Act as a catalyst for significant change. It will redefine how loyalty and customer engagement platforms operate, creating both opportunities and critical challenges. For brands and their technology partners, navigating this new landscape requires a strategic, forward-thinking approach that goes way beyond compliance.

Reshaping operations: the end of vendor lock-in

Loyalty and customer engagement platforms are inherently data-heavy. We continually integrate with e-commerce systems, point-of-sale terminals, CRMs, and customer data platforms. We move vast amounts of customer information between these different environments to create a unified view and deliver personalised experiences.

The EU Data Act aims to streamline and equalise this process. One of its core principles is to make it easier for brands to switch between cloud and data-processing service providers. This is a direct challenge to the issue of vendor lock-in, where high switching costs and technical barriers prevent companies from moving their data to a new provider.

This change effectively removes the ‘friction tax’ that companies used to face. For loyalty programs, this shift alleviates the fear of being tied to an underperforming provider. It enables brands to choose partners based on the strength of their innovation and value, rather than on how difficult it would be to extract their data in the future.

This is a significant win for competition and a validation of open, API-driven platforms designed for interoperability. The future belongs to flexible systems that can seamlessly connect with a brand’s evolving tech stack.

Challenges and opportunities in data management

The Act creates new dynamics for companies that manage large-scale customer data, presenting both hurdles and advantages.

The primary challenge is the heightened risk and governance associated with data mobility. As data moves more freely between cloud environments and third-party applications, the potential for security breaches and compliance issues grows. Moving customer data demands watertight governance. Compliance with both the new Data Act and the existing GDPR framework is more critical than ever.

Loyalty technology providers must prioritise transparency in their data flows, invest in robust consent management, and design modular architectures that integrate seamlessly across ecosystems. Without this discipline, the new freedom the EU Data Act brings could easily slide into poor practice, undermining customer trust and exposing brands to severe regulatory and reputational harm.

The flip side of this challenge is a massive opportunity for innovation. By reducing switching costs, the Act makes it easier for strategic partnerships to form and flourish. Brands can experiment with new technologies, from advanced AI-driven personalisation engines to emerging engagement channels, without being held back by a rigid, monolithic technology provider.

This flexibility ultimately leads to better, more engaging experiences for loyalty program members. When brands can easily integrate best-in-class solutions, they can deliver the hyper-personalised, value-driven interactions that modern consumers expect. The regulation fosters a more dynamic and competitive marketplace, where the most innovative solutions emerge to the forefront.

A dual approach to compliance: EU Data Act and GDPR

While the Data Act and GDPR are complementary, they have distinct focuses. GDPR governs the processing of personal data and protects individual privacy rights. The Data Act, on the other hand, establishes rules on who can access and use data generated within the EU across all sectors. For loyalty tech providers, aligning with both is non-negotiable.

The first priority must be data governance and transparency. Providers must clearly map out all data flows. Brands should be able to see exactly where their customer data is stored, how it is being processed, and which third parties have access to it. This requires robust data lineage and documentation capabilities.

Second, enhanced security measures are paramount. As data becomes more fluid, the need for end-to-end encryption, secure data transfer protocols, and stringent access controls becomes even more critical. Providers must prove that their infrastructure can protect data both at rest and in transit, regardless of the cloud environment.

Finally, designing for interoperability is key. Loyalty platforms should be built on an open, API-first architecture. This not only ensures compliance with the Data Act’s portability requirements but also future-proofs the technology. A modular design enables brands to add or remove services with minimal disruption, ensuring they can quickly adapt to market changes and new regulations.

How reduced switching costs drive better customer experience

Lowering the barriers to switching providers will have a ripple effect across the loyalty industry, influencing innovation, partnerships, and the end user’s experience. When companies are no longer locked into long-term contracts with inflexible providers, they are free to pursue excellence.

This freedom fosters a more competitive environment where technology providers must continuously innovate to retain their clients. The focus shifts from locking customers in to delivering undeniable value. It also encourages collaboration, as open platforms can more easily form partnerships to offer comprehensive, integrated solutions. For example, a loyalty platform might partner with a specialised AI vendor to enhance its predictive analytics capabilities, a collaboration made simpler by open data standards.

Ultimately, the person who benefits most is the end customer. Brands that can easily adopt cutting-edge tools will be better equipped to understand and serve their loyalty program members. They can deliver more relevant rewards, more personalised communications, and more engaging experiences. This creates a virtuous cycle: better experiences lead to stronger loyalty, which in turn generates richer data to further refine those experiences.

My advice to brands is not to treat compliance as a box-ticking exercise. Instead, use this moment to rethink your entire data strategy. Ask whether you are collecting the right data, whether you are using it responsibly, and if your organisation is agile enough to seize new tools as barriers fall away.

Those who can answer ‘yes’ will turn regulation into a source of powerful competitive advantage. The EU Data Act isn’t just another compliance hurdle; it’s an invitation to build a more open, innovative, and customer-centric future for loyalty.

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