Open Banking is on its way. Nine major UK banks are launching their Open Banking APIs shortly after the New Year's Day hangover has passed on January 13th 2018. From this date (or most likely the Monday afterwards), brand new financial tools and services will launch designed to help consumers and businesses make better use of their bank account to save money, make money, save time and generally take more control of their finances.
But, recent surveys and research, suggest Open Banking will be a flop because no one will trust a new tool or services enough to give them access to their bank accounts.
The importance of personal data security isn’t something to be taken lightly. With recent data breaches from the likes of Equifax and the Uber blackmail hack, consumers have been left helpless, with their personal information being exposed.
"66% of consumers are concerned about how their personal data will be used"
A survey conducted by Ipsos concluded that only ‘13% of UK account holders would be happy to share their banking data with third parties’.
If this is true we should all stop developing Open Banking solutions now and find new jobs. However, this survey and others like it are missing the point. They aren't evaluating how consumers will encounter Open Banking in the wild. Out of context questions without clearly setting out what’s in it for the customer have resulted in skewed statistics, that aren’t reflective of how consumers will ultimately adopt and dare I say, embrace open banking.
Here's my proof for why I believe Open Banking adoption will be far higher than surveys suggest...
Sharing our personal data is part of our everyday lives.
Today consumers actively transfer their personal data to save time and access personalised services. This is evidenced by the use of Facebook connect.
For example, you’re about to order a pizza through Just Eat but you’re stopped in your tracks as you don’t have an existing account. Eager to get your pizza as quickly as possible, you choose to ‘Continue with Facebook’ to save yourself from having to type out your email address and create a new password. With a click of a button, your pizza’s on its way.
When you connected your Facebook account, you gave permissions for JustEat to access your basic profile information, consisting of; date of birth, interests, email address, location and gender. Which they’ll use to market to you and analyse their audience demographics.
Many of us, including myself, connect third-party apps to Facebook instinctively.
It’s so popular in fact, that within the first 2 years of launching, Facebook connect added over 2 million third-party sites and applications. All of which use the transfer of personal data to offer third-party services or products that save time, offer personalised experiences or improve current processes.
A quick whip around the Bizfitech office found that we have, on average, 32 apps connected to our Facebook accounts, with companies such as Uber, Netflix and Spotify, to name but a few.
These 3rd party connections to Facebook may seem trivial in comparison to sharing access to your bank data, so how much value do consumers need to get in return for this data exchange. Open Banking has the power to provide a much higher level of benefit to consumers than just faster pizza delivery, it could save people thousands of pounds a year. A little bit more data, for loads more value. Open Banking offers the same ease and speed of connection and in a truly transparent, highly secure and regulated way. It will make clear what financial data you choose to share, for what benefit and with the same level of security as logging into your bank.
Open Banking will become second nature
Open Banking will make current, soul-destroying financial processes quick, easy and seamless.
A great example of this would be applying for a remortgage. In today’s system, an applicant will need to put aside several hours of their time to download and print recent bank statements from multiple providers, potentially post them via snail mail to the mortgage provider who will then transcribe the data, ask you questions about specific transactions and then get back to you with a decision in a few weeks. It’s pretty long-winded.
We are developing solutions for a leading online mortgage broker that will optimise this process both through security and speed. A quick connection will be able to supply all the information needed by the mortgage provider, allowing them to make a decision quicker and more accurately.
In the re-mortgage example above, using an Open Banking connection makes complete logical sense. It is these experiences of improved financial processes that people will buy into not “Open Banking” or the APIs used to make it possible.
Consumers don’t trust third parties… or do they?
A survey conducted by Accenture found that 85% claimed the increased 'risk of fraud as the biggest barrier to them sharing bank account information with third providers'.
Side note: This survey predominantly focussed on the introduction of open banking in third-party retail and social media markets, with automated transactions at the forefront. Barely even touching on the financial market, which open banking has been primarily implemented to improve.
Multiple safeguards have been put in place with Open Banking which ensures that third-party providers a consumer chooses to share their data with are; FCA regulated and are listed and approved by the open banking directory.
But it’s these crucial bits of information that aren’t being communicated to consumers. If you don’t supply them with all the facts and build trust, they'll obviously think the worst.
Consumers openly share their deepest, darkest secrets….just ask your new best friend Alexa
Although some consumers may be hesitant or have strong views about sharing their personal data, the likelihood is that they’re already willingly sharing it on a daily basis.
Whether it’s asking Alexa to play your favourite guilty pleasure when no one’s in the house, or Googling engagement rings and promptly clearing your browser history. We place a tremendous amount of trust in the likes of Google or Amazon, letting them into our homes and confiding in them like no other service out there, they probably know us better than our spouse, our friends, our priest and our maker.
But we’re OK with that, because by knowing our habits, desires and favourite brands, what we get in return, is a personalised experience that adds value to our everyday lives.
The same can be said for social media, within two minutes of landing on someone's Facebook page I can find out that person's relationship status, job title, interests and even their current location.
But we choose to publish all this information to the world so that we can remain connected and let everyone know how our own lives are playing out.
We share this data, because we want to access the service. This value exchange equation will remain the same for the financial services or products that make the most of open banking.
It’s simple, consumers who are in control of their data will share it where there is value shared in return.
At Handle we’ve been conducting extensive user testing to ensure that users understand the value they will get from Handle by connecting it to their bank account and how secure that process is.
Small business owners that I've personally come into contact with are encouragingly enthusiastic about the opportunities that open banking offers. In fact, we've already seen a lot of interest in the open banking technology that we're creating with >80% of our testers connecting their bank to Handle and over 100 small business owners already signed up to get early access to our beta programme.
With finance providers, such as Oakbrook Finance, already seeing >50% of their customers connect to their bank account (via direct access) to save time when applying for a loan. There’s a clear hunger for slicker, more seamless ways to get to the end result in the quickest way possible.
With the addition of open banking, these processes will become the safest and simplest ways for consumers to get the modern financial services they need. Open banking offers consumers the first mechanism that encourages complete transparency and control of personal data. The more consumers know about open banking, the better.
I’d love to hear your thoughts on this! Do you think consumers will connect with open banking? What are your thoughts on released surveys?
Have your say, comment on this LinkedIn post and let's start a conversation.