Open Banking is undoubtedly one of the biggest changes the UK financial services sector has seen.
But recent YouGov research found that 90 per cent of Brits haven’t ever heard of it, and after being told about it, 45 per cent are unlikely to use Open Banking even when it’s available.
The scheme is being driven by the UK government and has so far provided improved access to information such as ATM locations and product listings on banks’ websites.
Phase two, which will be implemented next year, is the real game changer. Nine banks have been mandated by the Competition and Markets Authority (CMA) to make bank transaction data for consenting individuals and businesses more accessible via new secure and direct data links.
This will dramatically change the banking experience, driving competition and innovation in the sector, and bringing a plethora of benefits for customers.
People will have easier access to products that are more appropriate for their needs and will no longer pay high prices for low-quality services. The ability for transactional data to be used to automate creditworthiness and affordability assessments, help detect fraud, and access products is endless.
Individuals and businesses will be able to control how their financial data is shared digitally and use it to provide a deeper picture of the way they manage their money to improve their relationships with financial providers.
So why isn’t there more excitement about Open Banking? Are fears of sharing data under the new scheme limiting enthusiasm for it?
When asked about sharing data in general, consumers are naturally wary – in our survey 60 per cent said they wouldn’t consent to their personal data being shared under Open Banking. It’s been engrained in us that sharing personal information is a dangerous game that could lead to potential data breaches and fraudulent activity.
Consumers post endless personal data on social media to the extent that fraudsters are able to steal their identities, but still maintain caution when sharing information with financial organisations through highly regulated channels.
There’s definitely scope for this initiative to have the major impact the CMA is hoping for. While consumers have concerns, it’s important to note that they do recognise the positive value of the tools which will be made possible under Open Banking.
Over half of the people we surveyed said they would find the capacity to compare current account offerings from different banks important, while 50 per cent of Brits said the same about being able to access lenders offering better terms for financial products.
A significant number felt that the potential to monitor their spending or debt more easily would be important. The most valued benefit, however, is the ability to better monitor their bank accounts to help protect against fraud.
People have clear concerns about being victims of fraud and are worried that more data sharing increases the risks. But Open Banking could actually help them become more aware.
To overcome these fears and enable people to experience the advantages of Open Banking, more needs to be done to educate consumers and gain their trust around data sharing. Without this, the initiative will not take off.
The industry needs to demonstrate transparency and value; banks and other providers must clearly communicate how data will be managed and protected, and the real life benefits data sharing can bring. Hesitation will widen the gap in the market for new startups and challengers to steal a march.
The new banking era will give consumers better access to high quality and targeted financial services – but only if more is done to get their buy in.