Banks have a duty to educate customers about Open Banking

By Jo Howes on Thursday 12 April 2018

Editor's PickOpinionDigital Banking

Jo Howes, Commercial Director, CREALOGIX Group, thinks Open Banking should mean a wholesale change between the relationships of banks and their customers.

The recent implementation of new Open Banking regulations have made ripples in the financial world, but they have not had quite the impact on consumers that was expected. In fact, there have been numerous stats from various sources that all show that the majority of consumers remain in the dark about what Open Banking means for them.

The Crealogix Group’s recent independent research had concurring results with 85 per cent of UK consumers either being unaware of Open Banking or not fully understanding its implications. This is a huge issue as it means that customers are set up lose out, as the big, high-street banks will have less of an incentive to improve and innovate their services.

The root of the problem is that many banks are not upholding their responsibility to educate their customers about Open Banking, despite being directed to by both the Competition and Markets Authority as well as PSD2. The majority of the UK population have not even heard of Open Banking, and less than 25 per cent of people that have been informed about it heard about it directly from their banks, indicating that the banks are failing in their duty to make the information concerning Open Banking readily available.


New challengers

Banks obviously have an interest in ensuring that their customers stay put, especially as they are rapidly trying to ramp up their own in-house versions of services offered by challenger banks. This is hardly surprising, as were their customers properly educated about Open Banking, the banks would be putting themselves into the undesirable position where they could no longer compete only amongst themselves for share of the consumer banking market. It would also amplify the pressure they are already under to catch-up to the more fintech savvy, customer centric start-ups that have speed and agility on their side. For example, earlier this month 94 per cent (over 362,000 customers) of active Monzo users have upgraded to a full current account.


Are security concerns justified?

As with any great change in finance, Open Banking has been received with cautiousness amongst the few who have heard about it. After all, sharing your personal banking data with third parties goes against what everyone has been taught from a young age. With the new regulations, Open Banking has the backing of the UK government and the EU. Theoretically, this should soothe the fear of customers who believe their banking login details would be at stake if they shared them with challenger banks.

As it stands, many people are wary of Open Banking, with 45.5 per cent of customers being wary about security. However, under the Open Banking Initiative, companies that wish to utilise Open Banking will need to apply to the FCA in order to receive permission to access banking data (this is only released if you explicitly give authorisation). In the event of fraud, consumers will receive special protection if they have used services from FCA regulated companies. With this information being easily available to UK consumers, a true revolution in banking could soon be underway.  


A better banking service for all

Open Banking has the potential to completely transform consumer banking as we know it. With enough uptake, established organisations will be under greater pressure to improve and innovate their offerings, giving customers the level of service that they seek. The dissatisfaction among customers is palpable. According to Gartner’s research on customer experiences, 52 per cent of consumers have switched banks within the past year and over 80 per cent are willing to pay more for better services. Banks can no longer rely on customer loyalty or customer apathy when so many more options are now available.   

Consumers are calling for change and it is the burgeoning fintech companies that can deliver it. The big banks with legacy apps are already trailing behind. HSBC will be the first high-street bank to offer an app to compete with the more nimble challenger bank’s offerings, long after Monzo and the like have made great strides with their innovations and grown their user base. Earlier this month, it was announced that a whopping 94 per cent (over 362,000 customers) of active Monzo users have upgraded to a full current account.

If Open Banking takes off, the relationship between banks and customers will have irrevocably changed for the better. For the first time, it will be the customers who lie truly at the heart of consumer banking operations and the banks will have to battle it out to be the best.

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