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Peer2Peer Finance News | March 19, 2019

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Security concerns remain major stumbling block for Open Banking

Security concerns remain major stumbling block for Open Banking
Tim Evershed

CONSUMER concerns over digital security are a major stumbling block for Open Banking, according to new research.

A survey by banking software provider Crealogix Group showed that 46 per cent of consumers are concerned about the security implications of Open Banking, including identity theft and data breaches.

And 69 per cent of consumers said that Open Banking was not a good idea, primarily because of those security concerns.

Read more: Open Banking firm joins UK trade mission to NY Fintech Week

The Open Banking data-sharing initiative, which mirrors the EU’s Payment Services Directive II (PSD2), mandates high street banks to share anonymised customer data with approved third parties, which can include peer-to-peer lenders.

“PSD2 brings fundamental change to the entire banking industry, but consumers are not being informed properly about the benefits, leaving them fearful of data breaches,” said Jo Howes, commercial director at Crealogix.

Read more: Open Banking prompts UK fintechs to reassess collaboration partners

“The regulation puts the consumer in the driving seat, providing choice and better control. It will increase the intensity of competition, ultimately leading to innovation.

“Traditional players who merely respond by doing the minimum necessary to become compliant will see their influence dwindle.”

Crealogix’s study of 2,000 consumers across the UK shows some of the obstacles Open Banking must address before it will see wide-scale adoption.

The research showed that younger, digital native, respondents were less concerned about security and protecting their data with only 28 per cent of 16 to 34-year olds expressing this fear, versus 64 per cent of the over-55s.

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Security concerns varied widely across regions too with Londoners least concerned and those in Scotland and the East of England most worried.

The research also suggests that banks are not doing enough to communicate with the consumers. It showed that 85 per cent of consumers have either never heard of, or are unsure, what the Open Banking initiative is and how it will affect them.