Open banking is vital to combat the rising cost of living – how can we improve consumer trust in it?
We all know dealing with the evolving cost of living crisis is going to require a coordinated effort across government, business and local communities. The fintech industry also has a vital role to play if support is going to effectively reach households of all incomes.
We recently held our first Fintech for Good roundtable inviting some of the UK’s most innovative fintechs and major players to discuss what support solutions are available to people and how the fintech sector can adapt to the ever-changing needs of the market.
One of the key issues we kept coming back to was how the continued low consumer appetite for open banking remains a huge barrier to implement the support solutions society desperately needs. Awareness may be rising, but the tide is turning far too slowly amidst rapidly rising living costs.
An integrated open banking approach can offer customers a range of benefits including smarter and faster insights, more aligned overview of their financial wellbeing as well as access to personalised products which can unlock savings. In just about every area of financial services, enhanced usage of open banking would be beneficial for consumers. Despite the benefits being clear, open banking remains underutilised, largely because we’re not seeing a change in consumer attitudes to its implementation – many simply cannot get past the “data sharing” aspect which is unsurprising given we’ve been told for decades not to share our data.
So more needs to be done to support open banking awareness. Partly this needs to be led by government and central bodies. Awareness campaigns to promote the benefits of open banking could transform usage and improve understanding of how customer data is used, especially amongst the demographics which are still reluctant to take the plunge, and if Government departments – like DWP – were to use it for benefits payments it would go a long way to increase consumer confidence.
But fintechs and the financial services industry more widely also needs to step up. As is often the case, this comes down to trust. Financial services need to ensure that it is continuously building trust with consumers – otherwise new technology can be seen as far too risky.
We also need to evaluate who consumers trust. For many, the 2008 financial crisis is still raw and this trust has yet to be rebuilt. There has been an evolution in trust in recent years – people who previously trusted banks may have been let down and now place their trust elsewhere, be that colleagues, employers or even influencers.
Fintechs therefore needs to cultivate partnerships with stakeholders outside of the industry if we have any hope of building trust and ultimately boosting open banking adoption.
The early adopters have already been converted to the benefits of open banking but that was never going to be an issue. Simply trudging on with the same approach to convert those individuals who may be less tech-savvy or wary of giving up control of their data is clearly not working. To reach these groups the entire sector needs to be more collaborative.
Without this shift in direction and focus, the vital support solutions being developed won’t fulfil their potential – not only because too few will use them, but because those who need them most will be missed.