THE success of Open Banking depends on the financial services sector’s ability to earn consumers’ trust, but a lack of communication about the legislation’s benefits means this could be an uphill battle.
Research shows there is still a lot of fear about sharing data, despite the imminent launch of Open Banking on 13 January.
The new legislation mandates high street banks to open up consumer data to third parties – including peer-to-peer lenders – on an anonymised basis.
A survey by Accenture towards the end of last year found two thirds of UK consumers said they would not share their financial data with third parties because of privacy concerns. A separate poll by Which? suggested 92 per cent of the British public have not even heard of Open Banking.
Samantha Seaton, chief executive of Moneyhub, a budgeting and saving app, said the success of the legislation will depend on the ability of fintechs to explain what the term Open Banking means and what advantages it can bring for consumers.
“Many consumers think Open Banking means their bank will open up all of their data for everyone to see,” she said. “We need to help consumers understand that sharing data is a choice they can make and, if they do, it will benefit them.”
Seaton added that many people are fearful of scams even though banks are only allowed to share data with providers who are authorised by the Financial Conduct Authority (FCA).
The big banks have been accused of contributing to consumers’ mistrust of Open Banking by using obtuse language, particularly around whether they are covered in the event of fraud.
“While the banks are in this unhelpful mode it makes it more difficult for the opportunities of Open Banking to be embraced,” said Seaton.
The FCA has now provided banks with a link to use when communicating with consumers about Open Banking. It specifically states that banks cannot hold people responsible for unauthorised transactions just because they shared their details with third parties.
In general, there has been very little publicity about the benefits of Open Banking for everyday people.
Victor Trokoudes, co-founder and chief executive of Plum, an artificial intelligence (AI) powered chatbot, said this is partly because it is not to the banks’ advantage.
“People confuse Open Banking with the widespread concerns around Facebook having access to their data,” he said. “Open Banking is different – data is being shared with a clear goal in mind. In our experience, when customers see the clear benefits of sharing data they are willing to do so.”
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Leon Muis, chief operating officer at money app Yolt, said the uncertainty around Open Banking is to be expected.
“Contactless payments were once a brand-new initiative which some people were unsure about, but this payment method now accounts for a third of all card transactions in the UK,” he said.
Muis pointed out that Open Banking has been developed with the highest security standards and therefore “isn’t something to be scared of”.