Data sharing

With the Open Banking initiative now well and truly underway, we’re gradually seeing the first signs of banks and banking associations informing the public about what it involves. And this is not a minute too soon, because consumer awareness about Open Banking is still low. According to recent research [1], only 18% to 35% of banking customers would feel comfortable sharing their account information with another bank in exchange for new online services.  

For consumers to benefit from Open Banking, it is necessary that banks embrace ‘openness’ (beyond PSD2) by exposing their assets through APIs, that applications are built on top of those APIs, and that consumers use them – adoption, in short. Consumer education is critical in facilitating adoption. As banks play a central role in Open Banking ecosystems, their approach to educating consumers is key to creating success.

For some, it may sound illogical for banks to play a dominant role in helping customers to use Open Banking services. Surely they risk losing business to third parties? However, the real risk lies in them not doing so. Traditional account services have become a commodity, and it is increasingly difficult to make a profit on such services. Banks have started to recognise that Open Banking opens up new business potential. Banks with an attractive customer base, perfect developer conditions (sandbox, developer portal), and wise monetisation choices will stimulate the use of their APIs, resulting in applications built to help their customers.

Maybe even more importantly, many believe that Open Banking is just the start. There are numerous signs that the open data initiative is spreading to other sectors, with new legislation aimed at putting the customer back in control. For example, Australian CDR legislation starts in banking but is intended to expand to energy and telecommunications. Meanwhile, the Dutch Ministry of Health, Welfare and Sports is taking concrete steps towards making electronic data exchange in accordance with the appropriate information standards a statutory obligation. This effort is about sharing data and tipping the ‘data benefit balance’ in the consumer’s favour.

In this endeavour, trust is the essential ingredient for success. For consumers, key questions include ‘Do I sufficiently trust the supplying party to provide access and share specific parts of my data in order to receive services that will benefit me?’ and ‘Who or what is backing up this trust?’. On a practical level, consumers also wondering ‘How do I keep track of whom I trust with what?.’ For service providers, trust revolves around questions such as ‘Do I have enough certainty on this customer to deliver my services?’

Against this backdrop of trust, banks are well-positioned to play a crucial role. There has long been a well-known saying in banking: ‘Customers may dislike us, but they trust us.’ This captures the sense that banks are regulated and licensed to work with consumers’ money and data, but few consumers have a positive emotional connection to their bank’s brand. Therefore, before consumers become willing to extend their trust in banks beyond the traditional domain and into new services – services that lie close to their homes, hearts and families – they first need to learn to like their banks all over again. In other words, to capitalise on the opportunities of Open Banking, banks need to change.

At the same time, banks can turn the process of informing consumers about Open Banking into a chance to win back the customer’s favour. When it comes to educating consumers, banks have a choice: should they tap into the ‘fear’ aspect or the ‘fun’ factor? The first approach focuses mostly on explaining PSD2 and the technical and legal implications for customers. Additionally, it emphasises the risks and the fact that customers do not have to give their consent. In fact, in a letter to inform me about the upcoming PSD2 regulation, my own bank wrote: ‘It is important to know that you don’t have to open up anything if you don’t want to.’ This is very much in line with what banks have historically told people: ‘Do not share your data or your PIN with anyone; beware of digital scams.’

But in the second approach, banks can reinforce their position as trusted partners. They can highlight how they play a positive role in making it clear and easy for consumers to actively manage their Open Banking consents. They can educate their customers about the benefits of Open Banking: how consumers can become financially savvy, get the most out of their money and data, and make use of new and innovative payment methods. Banks can also provide guidance to consumers in terms of what they should look for in services and what they can do if something goes wrong. They could even truly open up to their customers and allow them to rate the Open Banking services provided. In my opinion, the choice is clear: banks should put the ‘fun’ back into finance when educating consumers about Open Banking, and proudly present themselves to customers in their new, trusted and liked role.

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[1] Deloitte’s CEE PSD2 Voice of the Customer Survey, Jan. 2018