Consumer education crucial to Open Banking

By Alex Hamilton | 5 April 2019

Open Banking is being forced onto consumers when they haven’t been taught what the benefits might be, and banks must take responsibility for educating their customers before widespread adoption can be expected.

“We need to remember a few things about customer demand,” said Simen Munter, chief operating officer at Nordea, on a panel at a community conference in the Hague this week. “Think about this: why was internet banking so successful? It was because there was an immense pull from the customers who wanted those services. I don’t think we can force Open Banking onto the consumers before we have workable applications they want to use.”

An October 2018 survey conducted by Unlimited Group found 78% of consumers in the UK had never heard of Open Banking. Of those who had heard of the term, only 20% could define it. The report also found that 9% of survey participants had used a service that fell under the Open Banking category.

“We need to get working on application software that makes Open Banking attractive to the customer,” said Munter. “We need customers saying to each other, ‘are you seeing what you can do with this virtual assistant?’. Just telling customers what Open Banking is won’t work, they will say ‘yes, and?’”

“We need to be really conscious that the regulation is just a small part of this,” said Robert Dunn, head of operations at Volt Bank, also on the panel. “We need to bridge the gap of understanding for the customers, they need to know how they can get ownership and control of their data. At the moment they don’t really perceive how they can take advantage of the rights they have been given.”

Research published in April by the Economist Intelligence Unit reported that a third of all banks surveyed were planning to have an Open Banking strategy launched and operating by 2025, and 25% plan to have a scheme live by the end of 2020. That same month, the Open Banking Implementation Entity (OBIE) in the UK issued directions to five major banks – Bank of Ireland, Danske Bank, HSBC, Lloyds Banking Group and Santander – which “had not delivered on all aspects of their functionality”.

“We need to really bring the customer with us on the Open Banking journey,” said Dunn. “The industry needs to work together and also work with regulators. Even the name plays into the pessimism around trust and security, customers want to know how ‘open’ their data really is.

“To understand how the game is changing we need to align ourselves to customer experience. In financial services we often face a challenge by trying to find new technology, and it can sometimes be a solution looking for a problem. We need to ensure that we keep that customer demand in mind as we try and implement new technologies.”

“Banks have always been about technology,” said Munter. “But people have assumed that being digital and open will be about evolving your processes and transactions. I believe that being fully digital will involve bringing every expertise the bank has to every customer interaction.”

Dunn added that while Australia is behind the times when it comes to proper Open Banking implementation, major banks are moving in the right direction. “Part of what we’re doing is opening up an ethics framework, so that all of our user interfaces and offers we put in front of customers are applying principles of data ethics and privacy by design. It’s about stitching the rules and regulations into your existing systems and helping to explain and build a level of trust.”

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