Why aren’t consumers open to Open Banking?

The financial services industry sees open banking as an exciting development, bringing new opportunities for providers – both in the banking sector and elsewhere. Consumers will be able to access their bank accounts through specified third-party providers, making transactions, product comparisons and applications much easier and quicker.

What do people think about open banking?

I’ve read several articles recently discussing consumer concern about sharing their data via open banking when it becomes available next year. A recent study by Accenture [1] found that 69% of consumers say they would not share their bank account information with third-party providers. In fact, more than half (53%) say they will never change their existing banking habits and adopt open banking. However, in todays’ world of data security breaches and privacy concerns, perhaps it is not surprising that this direct question about the appeal of sharing banking information with non-banking providers leads to a negative response.

Simplicity and speed are the two features we often hear are important when it comes to banking – and areas that traditional banks are often challenged on. Open banking will deliver these benefits, but despite the bad press banks often receive, it seems consumers claim they will remain faithful to the traditional banks and are reluctant to consider more innovative providers. But do consumers really understand the benefits of open banking and how it will work? A lot more needs to be done to educate the public before we conclude that open banking will not be adopted.

Comparison with digital only banks

Digital only banks have seen considerable growth over the last few years, with new brands entering the market all the time. Appeal has been driven by innovation, where primary access is via a mobile app, accompanied by efficient online support and additional features which make managing money much easier and quicker. Customers tend to be younger so one of the real benefits of Monzo, for example, is the ease in which bills or purchases (e.g. event tickets, domestic items) can be split between friends and housemates. This is accompanied by the benefit of tracking and categorising spend in real time, so the user always has an up-to-date view of what their balance is and what their money has been spent on.

When digital banks enter the market, they are generally unknown brands, yet users have been content with setting up accounts and granting them access to their transactional data. The third parties who will enter the market as a result of open banking are likely to be established brands that people are already sharing information with (albeit less sensitive). However, current take up of digital banks remains low at around 1%.

Will Open Banking attract similar customers to digital banks?

It will be interesting to see how the take up of open banking compares to the take up digital only banks. Will open banking encourage interest from younger consumers, who are perhaps keener to adopt new solutions, in the same way digital banking has?

IFF’s new Fintech Beacon can help you understand more about the needs and motivations of current digital banking users, who may also be a key audience for open banking. For more information please contact Georgina Clarke in our financial services team:

Georgina Clarke, Director

E: georgina.clarke@iffresearch.com
M: 07715 961476

[1] https://newsroom.accenture.com/news/accenture-research-finds-lack-of-trust-in-third-party-providers-creates-major-opportunity-for-banks-as-open-banking-set-to-roll-out-across-europe.htm