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Consumers don’t know what open banking is – and that’s OK!

By Anton Zdziebczok, Head of Product Strategy at CREALOGIX

The UK’s open banking initiative has been in place for over a year now. However, consumers are still largely in the dark: the big high street banks have been slow to promote either the features or the benefits of open banking, and when banks do try to explain, consumers might encounter something along the lines of the following:

“Introduced by the CMA, and implemented by the OBIE, PSD2 uses APIs and open source technology such as OAuth 2.0 to achieve greater transparency and improve competition…” and so on.

While all this industry jargon may make life easier for communicating with industry insiders, you can be sure that to the average retail banking customer, market regulation and programming interfaces aren’t informing their financial decisions. So, it’s time for banks to start focusing on the things that are.

A stark lack of awareness around open banking

It turns out that consumer awareness around open banking has a long way to go. Research conducted by CREALOGIX in March 2018, two months after the introduction of the open banking initiative, found that the majority of UK consumers were still unsure of what open banking even is. Only 14 per cent were aware of the Open Banking initiative, and fewer than a quarter (22.8 per cent) had heard about it directly from their bank or building society.

A lack of awareness of open banking is not the biggest issue for banks, however, as people who have heard of it often express scepticism. 69 per cent of survey respondents expressed concern that open banking threatens the privacy of their banking data. Having your data compromised by lax policies at Facebook is one thing, but a loss of privacy in banking is clearly a matter of even greater sensitivity, and if affects almost everybody.

There’s an enormous challenge ahead of banks and fintechs when it comes to consumer education: encouraging greater adoption of open banking is not just about awareness, but also about transparency and providing answers to perfectly rational resistance.

So, does it matter if consumers know about open banking, per se?

It’s the prerogative of businesses and their product designers to focus on giving customers what they want, instead of trying to make customers understand regulation or industry jargon.

The key challenge, when it comes to the adoption of open banking, is that people are interested in solving their own specific problem or doing something in a more convenient way. For example, research from CREALOGIX shows that the younger generations are opening digital-only bank accounts in order to access mobile features that improve their management and control over finances, such as spending forecasts, alerts and the ability to freeze and unfreeze their bank card.

It’s these features that are important to the average consumer, rather than the underlying technology and regulation. Showing people how they can benefit is what really matters when it comes to improving awareness and adoption.

Show customers what they can do more easily with open banking

If you ask consumers – “are you taking advantage of open banking?” – it’s likely you will be met with blank stares. However, if you ask – “would you like to be able to view the real-time balances for all your credit cards, bank accounts, and pensions in one mobile dashboard?” – a lot of people are going to say yes, that sounds useful. 43 per cent of people to be exact, according to our research.

Open banking is a critical component of a competitive roadmap for all financial brands now, but technical explanations don’t attract customers and keep your current account holders loyal – quite the opposite. Traditional banks are now facing rapidly growing commercial competition from the challengers, and their future now depends on customer-centricity.

PwC predicts that by 2022, 64 per cent of adults will have adopted open banking technology. The key to achieving this is for banks to place the customer at the heart of its business and state their open banking aims in terms of what’s actually delivered to them.

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