The UK is looking to expand its open banking framework to cover credit cards and other payment tools, but there’s a risk that the dawn of the open banking era will be met with consumer indifference or even suspicion.
The Competition and Markets Authority’s timetable for open banking implementation specified a consumer education and awareness programme for Q4 2017 and Q1 2018. However, at the time of writing (late November 2017), there has been scant evidence of much progress in this respect. To date, communication has been limited to updates to banks’ terms and conditions, which may easily be overlooked by consumers. In some cases, these updates may even have the effect of alarming consumers.
For example, a leading UK bank recently sent an email to its customers that stated: “Some third-party providers (TPPs) might ask you for your online banking log-in details and password to provide their service to you. If you decide to give them this information, this means that they’ll be able to see and do anything you can do on your accounts [emphasis added].”
It went on to add: “If you give TPPs permission to access your accounts and account information, we’re not responsible for what they may do [emphasis added].”
Although the language used above is, strictly speaking, correct, the phrasing may be interpreted as rather negative in tone, and could lead consumers to fear for the security of their data – and money – should they decide to use open banking services. Messages such as this will be the first information that many consumers will have had about open banking, and risk creating a poor impression.
Given recent high-profile data breaches such as the Equifax case, many consumers will be understandably wary about anything that may leave them more exposed to the risk of fraud. Recent research by Accenture found that 69% of UK consumers claimed that they wouldn’t share their financial data with non-banks, and 85% state that fear of fraud would dissuade them from sharing data. The research also found that non-banks are trusted significantly less than banks when it comes to handling consumers’ financial data.
This means that those who are hoping that open banking will enable third parties to provide greater competition for banks may be disappointed, at least in the short-term. The regulators, as well as the providers, need to embark on a comprehensive and sustained campaign to educate the public about the benefits of open banking, making liberal use of specific use cases if consumers’ concerns are to be overcome. Unless such a campaign starts soon, the revolution is likely to start with a whimper, not a bang.
– This article is reproduced with kind permission from GlobalData. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Photo by aodaodaodaod, Shutterstock.com