Six months into Open Banking, two fifths of customers willing to share their bank transaction data with a new lender would do so if it provided product recommendations which save them money.
That’s according to research carried out by Equifax. Other motivations to share transaction data through Open Banking include the ability to easily compare products from different financial institutions (36 percent), being offered tailored incentives for switching to a new provider (34 percent), and a streamlined process when applying for mortgages (28 percent) and loans (25 percent).
Despite that, many in the profession warn that insufficient public profile has been given to the Open Banking project. Scott Greever, managing director of Elevate Credit UK, told Credit Strategy that the success of the initiative depends on a critical mass of consumers opting to share their data.
Open Banking enables banks, with customers’ permission, to grant third-party providers access to online accounts and payment services data, with a view to potentially offering them better deals.
“Open Banking is undoubtedly a hot topic in the financial services sector, but I think you would be hard-pressed to find a similar debate happening in the homes of everyday Brits," Greever said. "Consumer understanding is low, and with that comes low levels of trust and adoption.
He added that Elevate has been running a trial to better understand consumer willingness to share their banking details. That survey found just 25 percent of Elevate’s applicants did provide their information. Two-thirds (67 percent) continued to apply for their loan but did not share their details and eight percent abandoned the application altogether when presented with the option.
"While this is not actually Open Banking in its true form, it demonstrates significant reluctance from customers to share personal financial information," Greever said.
Last week, the Financial Conduct Authority (FCA) said the introduction of Open Banking represented “a crossroads” for the banking sector.
“Technological change, facilitated by Open Banking and the Second Payment Services Directive (PSD2), has the potential to drive innovation and competition for the benefit of consumers,” it said. It added that although the impact of Open Banking has yet to be seen, having only been introduced in January this year, there is potential for the initiative to encourage switching."
Jake Ranson, banking and financial institution spokesman at Equifax, said: “Since the implementation of Open Banking at the start of the year we’ve seen widespread product developments among banks and fintechs alike, as market players recognise the scope of opportunities available. New products and solutions such as HSBC’s credit application offering have come to market, showcasing the real life consumer benefits the initiative can deliver.
“Open Banking is moving the sector forward to the digital world and it’s an exciting time. As the rate of product launches accelerates awareness will continue to grow, providing the uplift in consumer engagement needed for the project to be truly transformational.”