Almost half of consumers are ‘scared’ of open banking

By Elliott Limb, Chief Customer Officer at Mambu

The last 18 months have supercharged the digital banking movement. As physical branches closed for business and public anxiety around cash handling reached fever pitch, the pandemic saw digital banking services go from nice-to-have to necessity. But banks shouldn’t assume their customers are comfortable with this rapid shift in the way we manage our money. And there’s work to be done if the industry wants to prevent a return to pre-pandemic habits. According to a recent Mambu report, nearly half (48%) of 2,000 consumers surveyed are ‘scared’ of open banking. That is, the principles that enable third-party providers access to customer data to deliver a range of digital and online financial services.

The data conscious consumer

Nearly three in five customers think open banking is a dangerous use of data sharing, while more than two fifths (43%) point to data sharing as their biggest concern regarding the banking practice.

Much of this anxiety stems from the very driver behind its increased adoption. While Covid-19 has accelerated the use of open banking services, it’s also led to the rise of the ‘data conscious’ consumer. The pandemic has fundamentally impacted public opinions around privacy, with 40% reporting it had changed their attitudes toward data sharing. As consumers become more aware of the data they share with financial services providers, it’s never been more important for banks to engage with their customers on these issues - and spend more effort on education.

The open banking opportunity

But it’s not all doom and gloom. At a time when job security and certainty about the future is in short supply, over half (52%) of consumers report wanting more control over their finances. As a result, demand for open banking services is growing exponentially. Nearly half of consumers (48%) want instant digital money transfers and more than a third (38%) want aggregated bank balances to get a 360-degree view of their spending. Budgeting and savings have also moved up the priority list, with a third (34%) of consumers wanting tips on better money management and a quarter (26%) seeking money-saving suggestions for their bills. This presents a huge opportunity for banks to talk to their customers about how digital and online banking services can help them. Now is the time for open banking to deliver on its promise: to improve the way customers move, manage and make the most of their money. So what’s holding it back?

Fear of the unknown

If banks want to reassure customers on data sharing and dispel damaging myths around privacy, they have to do a better job of explaining these services. Part of the problem is customers don’t understand what open banking is. And people fear what they don’t know. A staggering 52% of consumers have never heard of open banking and nearly two thirds (61%) claim never to have used it - despite 80% using one or more mobile finance apps. It’s hardly surprising. As a term, open banking is banal and jargon-esque. To be truly customer-centric, banks need to stop talking about ‘open banking’ and start showing people that it’s simply ‘smart banking’. After all, customers don’t need to know what open banking is. They want to know what it does for them and how it’s going to help improve their lives. Whether that’s viewing all of their financial information in one place, securing speedier loan approvals or getting their invoices paid faster, and more securely. This is the information consumers want, and the stats bear it out. Mambu’s survey data shows that 57% would be more likely to use open banking, if their banks had more successfully implemented and promoted it. A further 49% said their bank hadn’t explained what it was, while nearly a quarter (24%) said they could have explained it better. If banks are failing to educate customers on the benefits of open banking, how can they expect to reassure them that it’s safe?

Banks as gatekeepers

This is the kind of question banks need to start asking themselves. The industry is yet to realise the full potential of open banking - and banks themselves are the gatekeepers. A lack of understanding has allowed for a plethora of privacy concerns to take root among an increasingly data-conscious public. But it’s not too late for banks to turn the tide in the battle for the customer. The industry can address this knowledge gap by stepping up education and promotional efforts, and working with partners to better inform consumers on the benefits of ‘smart’ banking. It’s important these efforts not only highlight the simplicity of open banking but security and safety as well. Executed successfully, this will help banks build customer loyalty and provide genuinely innovative, revenue-generating services that drive post-pandemic growth.