A quiet earthquake: Open Banking in the UK

30 Oct 2018 | Research & Business Knowledge

Open Banking came into force in the UK in January this year.  On my 40th birthday, as it happens.  Much like my own milestone, Open Banking was widely spoken about beforehand and  hasn’t been mentioned much since.

In March 2017, the Economist predicted it would be “an earthquake in European Banking”.  But in May this year, the UK Government described its arrival as “rather quiet”.

Open Banking means customers can give consent to third parties to use their banking and transaction data.

There are plenty of benefits for customers.  They’ll get to use new, innovative platforms to manage their money or make payments. User experiences should improve.  And customers will be able to get better recommendations and offers based on their actual spending.

For example, you could let a price comparison site see your spending history to then recommend the best new current account for you.  Or you could share all your banking and savings information to get your mortgage application approved more quickly.

So why has everything gone quiet?

Partly because few companies have made open banking central to their strategy.  Only 13% of bank executives see it having the biggest impact on retail banks over the next couple of years (The Economist Intelligence Unit).  Some companies, like HSBC’s Connected Money app and ING’s Yolt, have made early moves; Clarity and Money Dashboard have been downloaded over 100,000 times.  But these examples are thin on the ground.

Maybe this is really because customers aren’t clamouring for it.  Around a third are interested in seeing their spending in different categories or seeing their accounts in one place (MINTEL).  Over half aren’t interested.

Customers’ primary concern is data security.  This is hardly surprising given the recent data security breaches by Facebook, BA and the Conservative Party.  Financial data is the type of data people are most concerned about sharing online.  And having financial data hacked or stolen is their top online security concern (MINTEL).

Our research suggests this may be more of an issue in the UK than elsewhere.  While the UK is a digital leader in many ways, digital banking hasn’t caught on as much as in other countries. In the UK, 72% use digital banking. T his figure is 95% in Iceland and Norway.  As eMarketer concludes:

“UK consumers have a few trust issues with mobile and are reticent to move their financial dealings fully over to these devices.”

However, for open banking, these concerns aren’t insoluble.

  • The device matters – UK consumers are more willing to share personal data on laptops than smartphones (MINTEL)
  • Security matters – 87% say improved security would encourage them to use open banking services (Gusto)
  • And type of data matters – consumers are more willing to share past purchase data than other types of data (MINTEL)

To overcome these barriers and build trust, open banking brands need to talk up the monetary benefits for consumers.  People say they’re more willing to share banking data if it helps them avoid overdraft charges, gives them better offers on their energy and broadband bills, and speeds up their mortgage being approved (MINTEL).

Perhaps unsurprisingly, young consumers are most likely to be the early adopters.  They value the convenience of accessing their money in a single, centralised application.  They’re happier to share their data. And they’re more likely to switch bank.

Maybe for once, it’ll be younger generations setting an example for older generations to follow.  And sadly, since my birthday this year, I probably don’t fall into the first camp.

If you’re interested, you can see more of our full analysis here –