Open banking will only be successful if consumers are on board.


Banking is open to business

Open banking is mutually beneficial for banks and consumers. It enables banking providers to maintain and expand their customer base by giving consumers access to better and more targeted financial advice, services and products. Open banking has the potential to generate an accessible, personalized, smooth digital banking experience.

The latest data from the UK’s Open Banking Implementation Entity (OBIE) – the body overseeing the adoption of the technology – is positive. It shows that the number of open bank payments has increased from 320,000 in 2018 to over 3.4 million in 2020.

Despite the growth in open banking over the past three years since the PSD2 regulation came into force, it is still in its infancy. Open banking is readily available and demand is growing, but not as fast as many predict. For open banking to be successful, consumers have to adopt it. To do this, banks need to be aware of the frictions that hinder adoption. Once the barriers are removed, the benefits of open banking to the consumer audience and all bank customers should be clearly communicated.

Overcoming consumer frictions

With Open Banking, banking and financial service providers can access individual customer accounts and transaction details at the push of a button. For example, when a customer agrees that their data will be released for a loan. With this information, lenders can do a solid analysis of a customer’s financials to ensure they can provide the loan.

Nevertheless, consumers in Europe are very reluctant to share their payment details via Open Banking. In the Netherlands, a survey by De Nederlandsche Bank (DNB) found that in 2020 only 25% of Dutch consumers shared their payment details in exchange for the provision of new services.

The majority of consumers shared data with their existing bank because consumers had more confidence in the bank of their main payment account compared to other parties. In addition, the survey found that consumers will be more reluctant to share their data with new entrants in the payments market.

The reasons for consumers’ reluctance to open banking can be traced back to privacy and security concerns about their transaction data being shared. It is considered to be one of the most privacy sensitive forms of information, especially when compared to other types of data. As a result, friction related to the security and privacy of open banking is one of the major obstacles.

The future of open banking

In order for Open Banking to develop to its full potential, end users must take advantage of the ability and accessibility of Open Banking. However, this starts with open banking providers gaining their trust by prioritizing their needs and requirements first.

Removing these barriers to adoption related to privacy, security and the safe handling of sensitive payment information should be high on the agenda for banking service providers if they are to be successful.

Safe handling of data and gaining consumer trust are essential for the longevity of Open Banking. In order for open banking providers to gain full trust, they have to answer the age-old question: “What is the benefit for me?”

Acceptance rates will only accelerate when customers come on board and familiarize themselves with Open Banking.


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