UK banks need to start spreading the word about the benefits that Open Banking can bring customers, in order to drive a virtuous adoption circle, says Chris Skinner.

The UK implemented Open Banking in January 2018 and now, almost two years later, the momentum is beginning to build.

The Open Banking Implementation Entity (OBIE) shared figures showing there are 49 million data sharing requests in the country monthly, doubling in the past seven months and up from just 720,000 requests in May 2018. In the UK, there are 180 regulated providers of application programming interfaces (APIs), up from 67 in 2018. These consist of 116 third-party providers (compared with 44 in 2018) and 64 deposit account providers, up from 23.

Credit checks

What are they using Open Banking for? One of the main uses is for credit checks. Forty percent of those data sharing requests flow through Experian and are used by landlords to check the credit of prospective tenants through firms such as CreditLadder. There are many other ways to use Open Banking, however.

For example, a new company called Currensea enables users to spend while abroad directly from their UK bank accounts, but without transaction charges and at decent foreign exchange rates. The service uses Open Banking APIs to access the bank from the card. In another example, Salt Edge allows fintech firms, lenders, credit bureaus and more to access Payment Services Directive 2 data without having to build their own APIs, via its Unified Gateway.

Even American Express (Amex) is getting in on the act. In September, Amex launched a new checkout service called ‘Pay with Bank transfer’, which allows UK users to pay online direct, account to account, even if they are not an Amex or credit card user. It pays quickly and easily from their bank account instead. In other words, there are many services being launched that are making finance and banking data interwoven into other services and processes, without customers necessarily being aware of it.

But to my mind, this is part of the problem. For example, when Open Banking came into force, there was negative news in the media about how it would probably make bank accounts more vulnerable to hacking. That is obviously not the case – why would a regulator bring in a law that would make you more likely to lose money? Equally, there is clear requirement for customers to give permission for third parties to access their data; and banks made it pretty hard for customers to give that permission. The more difficult it is to do something, the less likely you are to do it – so this approach of making permissions difficult has made it much less easy for Open Banking to work.

Scaring customers

These two factors are reinforced in many surveys that show consumers are scared of ‘open’ banking. A survey in early 2019 by Simon-Kucher & Partners, a global strategy and marketing consulting firm, found that 75% of bank customers felt they were unlikely or very unlikely to allow their banks to share their account information, and 39% said they would rethink their online transactions when told that the product or service would access their bank account data. That is not a great sales pitch.

However, OBIE is addressing this. For example, an OBIE report released in June 2019 shows that if properly used, Open Banking could unlock up to £18bn ($23.1bn) a year for the UK economy; £12bn of that for consumers, who could save costs and overheads through tailored services. According to the report, it would be particularly beneficial for those in financial distress, who could make savings of £287 a year using Open Banking. Maybe that is why Open Banking is now being discussed in many other markets, with Australia being one of the first to copy the UK programme.

Overall, Open Banking has not had an easy rollout in the UK. Initially misunderstood by consumers and resisted by banks, it was slow to take off. Nevertheless, the numbers have risen substantially – 49 million data shares a month is not insignificant by anyone’s count.

But that usage is mainly for business use and credit checks, while consumers and the real world remain in the dark about what Open Banking is and why they need it. This will only change as banks start educating customers about the benefits of the service.

Chris Skinner is an independent financial commentator and chairman of the London-based Financial Services Club.

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