72% of UK Adults don't know what Open Banking is
Open Banking and the second Payment Services Directive (PSD2) have modernised payment regulation and the sharing of customer data to improve competition in markets by making it easier for customers to have more choice and more control over their money and financial information. The UK's Open Banking regulation, effective on 13 January 2018, forces UK banks to open up customer data with their consent, but nearly nine months after it became legally enforced, 72% of UK adults stated they don't know what it is.
Under Open Banking, the nine largest UK retail banks and building societies (namely Barclays plc, Lloyds Banking Group plc, Santander, Danske, HSBC, RBS, Bank of Ireland, Nationwide Building Society and AIBG) are legally required to allow certain customer information to be shared securely online via Application Programming Interfaces (APIs) with other regulated companies. Other banks and building societies are allowed to voluntarily do the same.
We have however seen a wide divergence of interpretation when regulation and legislation is enacted and so Open Banking requires banks and building societies to standardise the APIs used to allow for consented third-parties to 'talk to' providers using a similar architecture.
In the first instance, the benefits of open banking allow for customers to compare the details of different current accounts and other banking services (such as the location of branches and ATMs) more easily. It is envisaged that in due course, Open Banking technology can help improve customer outcomes making it convenient to view all of your accounts in one single place, with opportunities for personal financial management apps to be created to help customers understand their spending habits better and manage their debt with pro-active alerts to choose lower interest rates or lower overdraft charges. It is also intended for business customers to obtain a series of tools to help cash flow management, access to credit and day-to-day management of accounts.
Despite these benefits, a YouGov poll indicated that 72% of adults do not know what open banking is while only 14% of those aged 18-24 aware of the legislation. The poll showed that the more affluent ABC1 group is more aware of Open Banking with 35% of those polled stating they have heard the term. For those who have heard of Open Banking, 20% stated that account aggregation would be the biggest benefit with 8% stating money management would be useful and 7% highlighting the benefits for choosing the right account.
HSBC is the only major bank to have created an app ('Connected Money') for its customers to hold all of their accounts in a single place. Should you wish to learn more, do visit www.openbanking.org.uk or give us a call and we'll be happy to help.