Mariane ter Veen, INNOPAY, paints for The Paypers' readers an overview of Open Banking and the banks' roles towards this initiative and towards consumer education
With Open Banking underway, we slowly see the first signs of banks and banking associations informing the public on what this initiative involves. Banks have a central role to play in Open Banking ecosystems, and on consumer education the choice is theirs: do they tap into the ‘fear’ emotion or the ‘fun’ part? The first approach focuses mostly on explaining PSD2, the technical and legal implications for customers, and stresses the risks and the choice of customers to not give consent. This is very much in line with what banks historically told us: ‘do not share your data or your PIN with anyone, beware of digital scams’.
The second approach is all about Open Banking and the benefits consumers can gain from it: ‘unlimited’ possibilities to actively manage and make the most out of their money and data and to have the choice in using new, innovative ways to make payments. Furthermore, it is transparent about where to turn to when something goes wrong.
For consumers to benefit from Open Banking, one needs banks that embrace ‘openness’ (beyond PSD2) by exposing their assets through APIs, applications built on top of these APIs, and consumers that use them – adoption, in short. Consumer awareness on Open Banking is low and only 18% to 35% of banking customers indicated they would be comfortable with sharing their account information with another bank in exchange for new online services.
Consumer education is critical in facilitating adoption. As banks have a central role to play in Open Banking ecosystems, their consumer education 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, also from third parties, and thus facilitate business from others. However, the real risk is not doing so. Traditional account services have become a commodity and earning on these services is increasingly harder. Open Banking taps into business potential and banks start to recognise it. 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, as many believe, Open Banking is just the start. Numerous signs and examples show that policy objectives of bringing the customer in control by enforcing organisations to open up data are spreading to other sectors. For example, Australian CDR legislation starts in banking, but aims to expand to energy and telecommunications, while 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 back in the direction of the consumer.
In this endeavour, ‘trust’ is the essential ingredient for success. On the consumer side: ‘Do I trust the supplying party enough 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?’, but also ‘how do I keep track of whom I trust with what?’. On the service provider side: ‘Do I have enough certainty on this customer to deliver my services?’
Banks are still very well positioned to play a crucial role in this new game. However, in order to do so, they need to change. As the saying goes among bankers on customers: ‘They may dislike us, but they trust us’. Banks are regulated and licensed to work with consumers’ money and data, but not a lot of consumers have a warm relation with their bank’s brand.
In order for consumers to grant banks the opportunity to expand their trust role beyond the traditional space and into new services – services that lie close to their homes, hearts, and families – they need to learn to like their banks all over again.
Consumer education can turn out to be a small, but pivotal force in this change. Open Banking could prove to be a big opportunity to win the customer back. Educating consumers, banks can position themselves as trust partners and play a positive role in making it transparent and easy for consumers to manage their Open Banking consents, enabling their consumers to become financially savvy, manage their money and data, and make use of exciting payment innovations. They can educate their customers on what Open Banking can bring them, what they should look for in services and make ‘what-to-do-when-it-goes-wrong’ transparent and easy for them, or even serve their customers by facilitating ratings on provided Open Banking services.
Unlike my bank – whose letter to inform me on the coming PSD2 regulation said: ‘important to know is that you don’t have to open up anything if you don’t want to’ –, banks should put the fun in finance and consumer education in Open Banking, and present themselves to customers in their new role.
The editorial was first published in the Open Banking Report 2019, which offers insightful editorials, interviews and expert analyses that paint an exhaustive picture of the Open Banking regulatory shifts and the important extents in which this impact the industry.
About Mariane ter Veen
Mariane is Director, lead Data Sharing at INNOPAY. She believes in a world where trusted data exchange is the key to unlocking new business models and reducing costs. She helps organisations excel in the networked economy, by adopting a more open outlook, collaborate across their ecosystems, and maximise new opportunities.
About INNOPAY
INNOPAY has a strong international track record as innovation expert in digital transactions space. Our aim is to help companies, organisations and consortia develop innovation strategies, co-create new products and services and digitally transform their business models.
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