March 23, 2018
Fintech and Open Banking: will it reach its potential?Contact
By Jordan Campbell, Account Director, Financial Services
How many times in 2017 did you read about the revolutionary tide set to hit financial services via Open Banking?
Open Banking, or PSD2 as it sometimes known, was set to have a transformative impact as the nine biggest banks in the UK would be obliged by law to open up their valuable data, allowing new services to be offered to the ultimate benefit of the consumer.
The financial services landscape would never be the same again after 13th January 2018 as Open Banking came into force.
However as its introduction moved up the mainstream news agenda at the start of the year, reality struck. Take BBC Money Box as a case point. While the show focused on the potential benefits of Open Banking, it also led heavily on perceived security risks and privacy issues surrounding the opening up of customer data to third parties. Those avid listeners with little knowledge beforehand were left less than excited.
Other media coverage struck a similar tone. The Money Editor of The Sunday Times personally highlighted his cynicism to readers, outlining that his bank account would remain “for his eyes only”. Letters to the editor in the following weeks were largely unanimous in their negativity, with one reader calling it “the most stupid and potentially dangerous financial development” they had come across.
Of course not all media coverage was negative but questions around security and data more than outweighed a narrative of innovation and potential for the end consumer.
Policymakers, regulators and those in industry that made Open Banking possible would of course rightly claim that such a reception was always to be expected and the benefits felt by the consumer will occur incrementally rather than overnight.
Indeed outside the financial services bubble and well informed fintech adopters, awareness of the changes brought about by Open Banking is low. Research conducted by Which? towards the end of 2017 indicated that 92% of people had never heard of Open Banking. Like all new initiatives, it will clearly take time before its impact is felt.
However, the negative reception its launch received suggests industry has more work to do than to just drive awareness. And unfortunately the reasons for this within the external environment now also go beyond the financial services industry.
Firstly, media sentiment towards ‘tech’ has grown increasingly negative. From cyberattacks to how companies use our data or even how much tax they pay, technology companies are in the firing line and have arguably replaced banks as enemy number one.
Secondly, consumers are becoming more engaged in how their data is used and have grown weary as a result of online fraud or privacy breaches. Findings published by Experian in December 2017, highlighted how 41% of people reluctantly accept the amount of data they need to share as trade off in order to access products. Stories such as the Facebook Cambridge Analytica data scandal do not help such perceptions and could herald a watershed moment in how engaged people are with their data.
Against this challenging backdrop, businesses seeking to maximise the potential around Open Banking must therefore make tackling this external environment a fundamental tenet of their communications strategy.
Despite the fact robust procedures are in place, such as permission requests before services are offered and an FCA register of those firms involved, businesses must double down on their messaging to counter increasingly cynical perceptions. Firms need to build trust with consumers and place transparency at the heart of the relationship from the outset. This is not to suggest that businesses are not doing so but the emerging data awakening highlights the added importance of getting this right.
The City Minister John Glen bullishly noted this week on how “fintech is set to change our lives”. While such a prediction is fair given the rate of change taking place within financial services, if the fintech industry is to realise this vision and expand access to a large segment of the population, it must overcome increasingly negative attitudes around the use of data.
Only when customers believe that their data is being used to serve their interests, rather than the business using it, will the revolutionary potential of Open Banking be realised.