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Peer2Peer Finance News | February 23, 2019

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Consumers need educating about benefits of Open Banking

Consumers need educating about benefits of Open Banking
Suzie Neuwirth

MORE needs to be done to improve public awareness of the benefits of Open Banking, a global data and analytics company claims.

GlobalData has urged regulators and third-party providers to educate consumers about the new regulations that come into effect next year, mandating banks to share consumer data with other companies. These third parties can include other lenders such as peer-to-peer finance platforms.

It cited research conducted by Accenture that found that 69 per cent of UK consumers did not want to share their financial data with non-banks, while 85 per cent said that fear of fraud would deter them from sharing data. It also found that non-banks are trusted significantly less than banks when it comes to handling consumers’ financial data.

Read more: City regulator warns against too much Open Banking hype

“The regulators, as well as the providers, need to embark upon a comprehensive and sustained campaign to educate the public about the benefits of Open Banking,” said Daoud Fakhri, Financial Analyst at GlobalData.

“They should make liberal use of specific use cases if consumers’ concerns are to be overcome.”

The Competition and Markets Authority has scheduled a consumer education and awareness programme around Open Banking for the fourth quarter of 2017 and the first quarter of 2018, although GlobalData says it has not seen much evidence of the programme’s progress so far.

Read more: Zopa: Open banking is an “exciting opportunity” for alternative lenders

“To date, communication has been limited to updates to banks’ terms and conditions, which may easily be overlooked by consumers,” said Fakhri. “In some cases, these updates may even have the effect of alarming consumers.”

A high street bank recently sent an email to its customers that stated: “Some third-party providers (TPPs) might ask you for your online banking log-in details and password to provide their service to you. If you decide to give them this information, this means that they’ll be able to see and do anything you can do on your accounts.

Read more: First Direct partners with Bud on new ‘marketplace banking’ app

“If you give TPPs permission to access your accounts and account information, we’re not responsible for what they may do.”

Fakrhi argues that these types of messages risk creating a poor impression of Open Banking.

“Given recent high-profile data breaches, such as the Equifax case, many consumers will be understandably wary about anything that may leave them more exposed to the risk of fraud,” he added.