Helping consumers understand Open Banking is smart banking

Read how Open Banking is meant to give customers more choice and options and why it has the potential to build loyalty and profits for financial institutions

The digital banking movement has been supercharged over the past 18 months. As physical branches closed for business and public anxiety around cash handling reached a fever pitch, the pandemic saw digital banking services go from nice-to-have to necessity.

But banks shouldn’t assume their customers are comfortable with this rapid shift in the way we manage our money. There’s work to be done if the industry wants to keep customers engaged and using digital channels, particularly with the implementation of Open Banking.

It’s been three years since Open Banking’s first adoption – but have we seen the best of its capabilities, and conveyed this to consumers?

Open Banking was meant to give customers more choice and options but it is perhaps one of the most misunderstood recent developments in financial services.

Financial institutions may be missing out on an opportunity to build loyalty among their customers by showing them how useful Open Banking can be. The most loved financial brands are ones that consumers deem to be helpful and empathetic.

For banks, Open Banking has the potential to build loyalty and profits, but customers are confused as to what Open Banking really is. To truly be customer-centric, it’s time to show customers that it’s simply ‘smart banking’.

What do consumers think?

To get better insight into how people view and use Open Banking today, we asked 2,000 global banking customers. Our recent research  found that nearly half (48%) of respondents are ‘scared’ of Open Banking. That is because of the principles that enable third-party providers to access customer data to deliver a range of digital and online financial services.

The data conscious consumer

Nearly three in five customers think Open Banking is a dangerous use of data sharing, while more than two-fifths (43%) point to data sharing as their biggest concern regarding the banking practice.

Much of this anxiety stems from the very driver behind its increased adoption. While COVID-19 has accelerated the use of Open Banking services, it’s also led to the rise of the ‘data conscious’ consumer.

The pandemic has fundamentally impacted public opinions around privacy, with 40% reporting it had changed their attitudes toward data sharing. As consumers become more aware of the data they share with financial services providers, it’s never been more important for banks to engage with their customers on these issues – and spend more effort on education.

The Open Banking opportunity

But it’s not all doom and gloom. At a time when job security and certainty about the future is in short supply, over half (52%) of consumers report wanting more control over their finances.

As a result, demand for Open Banking services is growing exponentially. Nearly half of consumers (48%) want instant digital money transfers and more than a third (38%) want aggregated bank balances to get a 360-degree view of their spending.

Budgeting and savings have also moved up the priority list, with a third (34%) of consumers wanting tips on better money management and a quarter (26%) seeking money-saving suggestions for their bills.

This presents a huge opportunity for banks to talk to their customers about how digital and online banking services can help them. Now is the time for Open Banking to deliver on its promise: to improve the way customers move, manage, and make the most of their money.

So, what’s holding it back?

Fear of the unknown

If banks want to reassure customers on data sharing and dispel damaging myths around privacy, they have to do a better job of explaining these services. Part of the problem is customers don’t understand what Open Banking is. And people fear what they don’t know.

After all, customers don’t need to know what Open Banking is. But they do want to know what it does for them and how it’s going to help improve their lives. Whether that’s viewing all of their financial information in one place, securing speedier loan approvals, or getting their invoices paid faster, and more securely.

Open wide opportunities

Open Banking allows for innovation and customisation in scenarios that institutions cannot possibly predict yet. This means more opportunities to differentiate and offer personalised services that keep customers engaged.  Financial institutions can lean into this potential by getting to know their customers better, giving them the information they need to make informed decisions, and ensuring consumer’s concerns are alleviated.

Rather than try to explain the use of APIs and PSD2, financial services providers should focus on communicating the full value of Open Banking and the benefits it can bring. Align messaging to the features that customers value most, such as money transfer between different accounts and seeing multiple account balances together at a glance and always highlight that data and privacy are a priority.

The result? Increased trust and a willingness to embrace the advantages of Open Banking by end-users, leading to higher adoption of new, innovative solutions and fintech services.

This interview was originally published inside the Open Banking Report 2021. To download the report, please click here.

About Mambu

Mambu launched in 2011 with the aim of enabling free access to modern financial services for all. The only true SaaS cloud banking platform, Mambu’s unique composable approach allows for the assembly of independent components and systems to fit the needs of your business and customers.