Only 14% of UK consumers ‘completely understand’ Open Banking - Ecommpay

It would help if there was public information regarding the 'benefits' of open banking. Whilst I believe that understand it, it appears to be of no value to me.

Throughout the lifecycle of Open Banking this has been an ongoing debate on how much consumers should or need to understand the topic. 

In the UK we combine Open Banking as both payments and data which in itself is confusing to most users. In many countries it just means data. As an industry this is something we need to address at some point. 

In my experience at the end of the day it doesn't matter. We have to focus on the value we can create from Open Banking and not the technology itself. There are lots of benefits to Open Banking/Open Finance Data accross a range of use cases and industries. It is creating value from this data that should be our focus as industry. 

Ha! 14% think they fully understand OpenBanking

There's no Open Banking regulation in USA. Still the fintech industry has created tremendous value for data exchange in the form of apps for stock trading, wealth management, automated savings, money management, etc. Exhibit A: One in four people in USA - around 80M in total - is a user of one or more of these apps and has shared their banking data with them. 

OTOH, in EU / UK, Open Banking is a regulatory mandate, it has been in the works for nearly a decade, and still there are fewer than 5M users of Open Banking apps. Seems like not even 14% of industry insiders have a clue about how to create value from Open Banking. If they stopped their obsession with scraping v. API, I'm guessing they'd have greater success at creating value from Open Banking. 

Thanks for your comment, Melvin. In terms of public information, there are many articles and white papers from various sources on how Open Banking can change the industry and benefit consumers. The UK is counted as one of the strongest and most advanced regions in terms of Open Banking adoption, so naturally, there is a lot of focus but I do agree that there is more education needed at the consumer level. Security is absolutely key and of paramount importance to end-users, this is where OB can reduce fraud; a user always confirms their payment via Strong Customer Authentication using Face ID, Touch ID, or unique passwords. When confirming the payment, the user is redirected to their own online banking app within a secure environment, it is important to note that only regulated providers are allowed to initiate OB payment.

For merchants who are considering Open Banking, there are 2 major factors that make it an attractive proposition – Costs & no risk of chargebacks. During the height of Covid, we saw an increased risk of chargebacks as well as fraud. Online shopping fraud statistics show that global losses from payment fraud reached $32.39 in 2020 – three times more than in 2011. 

Definitely agree with you, James. As an industry, we have to focus on the value that Open Banking can bring to both businesses and end-users. For businesses, the advantages are more or less straightforward (lower costs, SCA, no chargebacks, data about the users), whereas users need an explanation on why they are better off using their bank instead of a card.  Consumers are creatures of habit and are used to paying with their cards, or other traditional methods and would naturally assume that it is a more secure way to pay. We are not claiming that Open Banking will replace payment cards, but it will be interesting to see how the industry adopts Open Banking and its inherent advantages.  The industry is moving fast, creativity is key, so coming up with innovative products that consumers can use without being afraid, in this case, to use their bank, either for payment or for information. There is still room for innovation with Open Data.

That’s a good point, Ketharaman, if we compare the US regulation with the UK/EU regulation. In the USA Open Banking is more industry-based, whereas in the UK/EU it’s regulatory-based. When an industry in the US sees that there is a demand for opening data, it focuses on developing that product. Whereas in the UK/EU the regulator decides first that they open data and then the industry should adjust to these regulations.