By Tim Waterman on Monday 18 October 2021
Tim Waterman, Chief Commercial Officer, Zopa argues that awareness of the consumer benefits needs to be improved for the next leg of growth for open banking.
Reports show that we are nearing 4 million open banking customers in the UK. Although this sounds like a large number, should we be patting ourselves on the back? Arguably, not yet.
Since its inception, the goal has always been to bring open banking into the mass market, so as many people as possible can enjoy the benefits of the technology. While progress has been made by several players using open banking to help customers in innovative ways, there is still more that can be done.
By raising awareness and offering the right innovative, truly impactful products, by 2025, around 40 million people could have accessed open banking services and a quarter with some regularity.
This is a bold estimate, and will only be achievable if the industry continues to push forward with innovative, more beneficial uses of open banking that are easily accessible throughout a number of new verticals.
The big open banking delay
There are a few reasons for the slow uptake of open banking. Initially, there were structural problems, including issues with the availability and performance of APIs. This meant that early, visible services for consumers were generally limited to such things as account aggregation. Data privacy and security were also barriers to adoption.
Consumers are often rightly wary of sharing data with third parties, which is what makes open banking possible. This can be somewhat attributed to the close timing of the data rule changes brought about by GDPR, and the introduction of open banking regulation back in 2018.
These are certainly issues being addressed, but perhaps the more pressing issue is that we’re not seeing enough of the innovative products that make the most of open banking and which customers really stand to benefit from.
Unsurprisingly, consumer awareness of open banking in the UK is low; 63 per cent of people say they have not made use of open banking and many are unaware even of its existence as a concept.
This is likely because discussions around open banking are dominated by business-to-business topics, such as integrations and APIs, rather than the benefits which open banking can bring to the consumer. In order to raise awareness levels and increase usage, the industry must put the customer and their needs at the heart of the open banking conversation moving forward.
For the vast majority of consumers, usage is currently centred around viewing bank accounts in a single place, and other routine applications and services. Here lies the opportunity.
Consumers have told us they will use open banking if it helps them with things they truly need and value, such as cheaper and easier access to credit. By coming together as an industry, focussing on the services which customers really want and need, we can rapidly accelerate the adoption of open banking.
So the potential is there. The market is there. We just need to link the benefits to the open banking solution. The are several uses to help build momentum amongst consumers include:
· Using open banking to prove income to potential landlords/lettings agents, which in turn helps provide more accurate credit files)
· Making use of open banking to help customers improve their credit scores
· Allowing lenders to look more holistically at a potential borrower’s financial history and their ability to afford repayments via open banking
· Provide consumers with compelling payment experiences using open banking payment initiation
Innovations in these areas will make financial management more efficient and improve access to financial products for millions of people. To aid the narrative of open banking as an opportunity, the industry shouldn’t only continue to innovate but also share its innovations with the public to demonstrate the benefits for consumers.
As the digitisation of financial services continues at pace, and consumer comfort with the online world increases, innovative financial service providers should shout about this change in consumer behaviour to increase usage of open banking products. This is truly how we’ll hit the 40 million mark by 2025.
As was discussed at AltFi’s recent open banking forum 2021, the opportunity to transform the way we conduct our finances digitally, with rapid, intuitive access to products and services from multiple providers through the sharing of financial data, must not be missed.