Making a success of Open Banking: Why we should stop talking about “Open Banking”

Since Open Banking regulation was announced much has been said about how it will be utilised successfully, but the reality is we are still some way off knowing the answer. That aside, there are a number of key things generally considered to be central to achieving success:

• Organising and delivering with a clear customer focus
• Cultural and societal changes to encourage mobile use and data sharing
• Partnerships to speed up delivery and encourage innovation
• Rapid scaling, and taking advantage of successful products
• And crucially a product, or a number of products, that provide value to customers

These have all been discussed many times before, but a key hindrance sitting across all of these is that the term “Open Banking” is often used in an entirely unhelpful way. We talk about delivering Open Banking success, when in reality it is just regulation. The success factors above are geared towards how banks successfully take advantage of the regulation, and in what form. Open Banking is just a concept that will hopefully enable a new set of products, and those products will not be called “Open Banking”. The more it is referred to as a discrete thing to deliver, the harder it becomes to deliver on its vast potential. Coupled with the fact that most customers have not heard of it, and many that have inherently don’t find “open” and “banking” two words that sit well together, this makes the continued use of the term unproductive.

“Most customers have not heard of it, and many that have inherently don’t find “open” and “banking” two words that sit well together, this makes the continued use of the term unproductive”

Picking up that point, a YouGov poll from last August showed 72% of adults in the UK had never heard of Open Banking[1], and while this may have changed a little over the last year, it is unlikely to have shifted dramatically. Of those that have heard of it, many do not fully understand it or are sceptical of what it represents. As a phrase, it is not well designed to inspire trust in a generation of people who view personal data as private and sacrosanct. As mentioned earlier, this societal shift is a key part of the success of Open Banking, and whilst the name is only one small part of this, it certainly does not help foster customer trust, partly because of its nebulous meaning, and also because it conjures an image for many of their financial data being “open”. After regulation was introduced in the UK in 2018, a study found only 3 in 10 people would trust it[2]. The branding is as important as the product being offered, and that starts internally within financial institutions looking to take advantage of it.

The focus should be on identifying the specific potential use cases that customers will value and organising delivery around them rather than the overall concept of Open Banking. That is easier said than done, but there are a number of use cases out there already and more on the horizon that could be hugely successful if delivered well, such as effective marketplaces, payments initiation and improved loan and mortgage journeys.

“Open Banking regulation will be a success when it has enabled those new means of banking that consumers can use and trust”

Part of the change required is to shift the mindset to recognise that Open Banking regulation represents one new toolset among many that enable new products and services. Digital technology, changing consumer habits, increased use of mobile banking, specialised start-ups and fintechs, and customer ownership of data are all changing the way people manage their money. Open Banking regulation will be a success when it has enabled those new means of banking that consumers can use and trust, when customers get a new product through their mobile app that makes their life easier, regardless of the regulation that has enabled it. Crucially though, these products are not Open Banking and will not be referred to as such. Recognising that is one of the steps to ensure success.

This may result in platform banking, or the rise of fintechs, or the traditional banks maintaining dominance, but however success looks it will be enabled a number of specific products rather than one “Open Banking” product. Building the “bank of the future” relies on having a clear, comprehensible strategy that moves away from ideas of delivering Open Banking to one that has a clear set of customer products enabled by the new tools available. Fundamentally, Open Banking will only succeed when the term has died, with focus turning instead to the specific benefits it brings.

[1] https://yougov.co.uk/topics/finance/articles-reports/2018/08/01/three-quarters-britons-havent-heard-open-banking

[2] https://www.ftadviser.com/mortgages/2018/03/05/less-than-a-third-of-customers-trust-open-banking/