Why open banking shouldn’t be seen or heard

Have you ever discussed customer relationship management (CRM) platforms around the dinner table with your family? Or perhaps enterprise resource planning (ERP) software with your first date? Hopefully not. But, as witnessed at many social gatherings, the customer service you receive from your mobile phone provider or bank can be a hot topic of conversation.

The point being, consumers don't necessarily need to know (or care) about the behind-the-scenes systems a business uses to provide their service, but they do expect the business to deliver on what they promise, share valuable insights, and provide a great customer experience.

Nearly one year in, this is the challenge faced by open banking.

73.5% of Australian respondents have never heard of open banking. But we don't need to understand open banking for it to make our lives better.

According to recent research commissioned by Mambu, 73.5% of Australian respondents have never heard of open banking. Conversely, the report, which surveyed more than 2,000 global consumers to understand what they think about open banking today, also revealed that while there is an inherent fear around open banking (with 48.2% of respondents being scared to use it), more than 77% of Australians are using one or more mobile finance apps.

This adoption of new financial services platforms indicates that Australian consumers are already embracing the ideology of what open banking promises to deliver. However, there is still a long, long road ahead to build trust.

To set the scene: Open banking is part of the broader Consumer Data Right (CDR) being rolled out in Australia that empowers consumers to share their transactional data with trusted third parties to get better financial outcomes. Other sectors to follow suit as part of the CDR will be utilities and telecoms, so consumers can enjoy better energy and phone deals too.

Of course, we have been able to use our personal data for a long time now. For example, providing mortgage brokers with our bulky printed bank statements and payslips to prove we're good for a loan.

What makes open banking new is that it uses next-generation technology such as API connectivity to deliver this data in near to real-time. This instant data has the potential to provide incredibly powerful insights that can help consumers better understand their spending habits and discover unique ways to enjoy a financial upside.

When exploring further what consumers want from open banking, the survey highlights the following:

• Instantly transfer money between different accounts (48%)
• See different account balances together at a glance (38%)
• Help boost my savings automatically (36%)
• Receive helpful hints about better money management (34%)
• Receive one overall monthly bank statement (34%)
• Allow access to banking data to receive automatic suggestions about money saving on bills and insurance (26%)
   

With so many apparent benefits, why hasn't open banking been more successful?

Despite the increased number of use cases emerging over the past twelve months, there are still only a handful of accredited data recipients in Australia, and many banks have successfully requested extensions on regulatory deadlines to turn on their open banking pipes. This failure to deliver on time and promote the actual benefits of open banking has led to a generally sceptic view of the initiative.

The survey revealed that 57% of responders said they would be more likely to use it if their bank had more successfully implemented and promoted it, so there is hope.

72% of Australian respondents highlighted data security as their biggest concern

Moving forward, the focus needs to be on the benefits that open banking can deliver and to ultimately build trust around data security, which 72% of Australian respondents highlighted as their biggest concern. So less talk about open banking, and more focus on the products and services it will drive most securely and efficiently.

By way of comparison, consumers don't pay much attention to concepts like real-time payments schemes that now exist in more than 63 domestic markets across the world – we've become used to funds clearing instantly when we transfer money via our banking apps. The fact that we are unknowingly using the New Payments Platform (NPP) in Australia to do this doesn't matter to most people.

Similarly, not many consumers would be aware of the technology platforms that help banks manage their mortgage books or term deposits, and why should they? But we certainly expect the bank to calculate our interest correctly, seamlessly offset against our savings and have a deep understanding of our financial positions when it comes to refinancing.

To truly be customer-centric, it's time to stop talking 'open banking' and show consumers that it's simply 'smart banking', using modern technology to deliver better financial – and social – outcomes.

So no more arguing at the dinner table about how badly your bank treated you on that call.