Community
There is reason for cautious optimism when it comes to people’s personal finances at the moment. Inflation in the UK is beginning to ease, with similar pictures in the US and a number of other European economies.
This has obviously not been the case in recent years. During these difficult times, we’ve seen consumers across Europe turn to their banks and financial providers for more support – from taking out new credit or loan products to embracing digital services as a means of better managing their day-to-day finances.
But even as the green shoots of recovery start to emerge, it’s important to remember that for many, particularly in the UK, reliance on credit will continue. In fact household debt in the UK topped £2 trillion for the first time ever last year.
Promisingly, banks and financial institutions have begun to re-evaluate their current offerings embracing some of the latest innovations like open banking – which recently hit 10 million users earlier in the year - to help support as many people as possible, for example for assessing creditworthiness.
Yet 10 million users equates to just 15% of the population, suggesting many people in the UK are missing out on the benefits of open banking. And when compared to their global counterparts, Brits appear to be staying true to their stereotypical pessimism towards the safety and security of their financial data, which might be behind this slow uptake.
UK consumers have the lowest levels of trust
Our research has found that consumers in the UK have some of the worst trust levels in banks and financial providers to keep their data safe. Just over half (53%) of people living in the UK believe that their current provider can keep their data safe.
This number is significantly lower than consumers in Europe and the US. Across the rest of Europe, just under a third (62%) of consumers trust their financial services providers, rising to nearly three quarters of Americans (72%). Italians are the most trusting of their banks to keep their data safe (74%) followed by 60% of French consumers who also believe their data is being kept safe.
The rising problem of UK fraud
So, what are the reasons for this scepticism towards banks? At a closer look, this erosion of trust across the UK initially appears to be a result in part of security fears, and the perception that sharing more data with providers will increase the risk of fraud.
Considering that fraud now makes up 40% of crime in the UK, it’s understandable that many remain suspicious of their banks’ ability to safely handle their data, admitting that they’ll try to limit how much information they share with them. And over half (55%) of UK consumers said they would switch banks if they felt their personal data was not secure.
This fear is misplaced as open banking can actually reduce the risk of fraud by minimising the need to input card details when making payments, and in ensuring robust ID verification for financial products.
But banks are stuck between a rock and a hard place on the issue. While they need to encourage their customers to use technology such as open banking to better support them during these tough times, concerns about sharing financial data are making this challenging.
However, the good news is that when we take a slightly closer look at the statistics, the solution may be simpler than it seems.
CRIF data finds that six in ten (59%) younger adults (aged 18-34) would be willing to share more data if it helped them access products at a cheaper rate and 62% would do so in return for help with their credit score and access to better products and services. Similarly, six in ten (64%) would be open to sharing more data if it meant they were better safeguarded against fraud – such as identity fraud or authorised push payment fraud – which is unsurprising given UK Finance data shows £1.2bn was stolen from UK consumers last year.
Given this openness in the face of the benefits on offer, perhaps it is more a lack of clarity around these benefits among UK consumers rather than an inherent scepticism against it.
Communication is key
Although banks and financial providers have taken promising steps to better help consumers by adopting innovations such as open banking, they must now look ahead at how they can keep this positive momentum going and educate their customers on why it will help them.
By directly addressing people’s fears around data security and reassuring customers of the safety of technology, like open banking, as well as the positive impact for individuals personally, it’s clear that consumers will become more open to these concepts.
Because our data shows that when presented with the benefits of data sharing – whether that’s getting a better deal, protecting themselves from fraud, accessing credit more quickly or increasing their chances of being approved for a loan – consumers, particularly younger ones, are far more willing to adopt.
If banks and financial institutions want to build on the solid foundations they’ve created and ensure the 10 million figure continues to rise, it is crucial that benefits are communicated to customers clearly, and repeatedly, making sure that everyone can benefit from this technology.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Kunal Jhunjhunwala Founder at airpay payment services
22 November
Shiv Nanda Content Strategist at https://www.financialexpress.com/
David Smith Information Analyst at ManpowerGroup
20 November
Konstantin Rabin Head of Marketing at Kontomatik
19 November
Welcome to Finextra. We use cookies to help us to deliver our services. You may change your preferences at our Cookie Centre.
Please read our Privacy Policy.