Open banking is a victim of its own nomenclature
The word ‘open’ feels more loaded than it once did. And that’s before we get to ‘banking’…
At Mint we’re super proud of the work we did on the Open Up Challenge in 2017. We worked as user experience consultants to help emerging fintechs as they work to leverage the opportunities for open banking data.
Open banking is about to become a reality in the UK, but the hard work of getting consumers to buy into it is just beginning. And I think the current sociopolitical climate might make this job even harder.
According to a Which! survey, 92% of people claim not to have heard of open banking. And without a prominent, mainstream ‘killer app’ that demonstrates its benefits, the knowledge vacuum is filled by scaremongering newspapers.
This week, for example, The Times and The Telegraph have chosen to focus on the possibility of scams and fraud, rather than the fact that we could — and should — be on the brink of the biggest step forward in the UK’s relationship with money in a generation.
Time and again during the Open Up Challenge, we heard from fintechs who are looking to help small firms that have to battle with banks to get what they need to build their businesses, because banks are the data gatekeepers.
Downloading bank statements, photocopying them and re-uploading them — just to be considered for a relatively small amount of financing — is a considerable burden if you’re a sole trader with nobody to help share the load. It’s even more onerous if your bank doesn’t make it obvious how to download those bank statements in the first place.
Now imagine being able to click a button to share that banking data instead, and getting the result of your financing application in minutes. That’s the kind of value open banking allows, but there aren’t yet enough visible examples for consumers to realise this.
Unfortunately, the term ‘open banking’ itself is a potential problem. To signify something as ‘open’ creates a binary construct whereby the only other option is ‘closed’.
So, if you don’t know that you have full control over what data you share, and with whom, you could be forgiven for thinking that ‘open banking’ equals sharing all your information with everyone. The reality is that there is considerable nuance involved here — but nuance is easily lost in the pursuit of headlines.
I also wonder if the very word ‘open’, in 2018, feels more loaded than it would have, say, five years ago. Certainly, for more reactionary parts of the media, it can be handily associated with themes of insecurity, fear and threat — ‘throwing open borders’, etc — and one could make an argument that as a nation we’re taking steps towards a more closed mindset in general.
And all that is before we get to the word ‘banking’. Comments like those on this BBC article or this Guardian article illustrate that for many members of society, any mention of banks is enough to trigger fury.
This is a shame because, in fact, open banking — mandated by the CMA to increase competitiveness in the market — is one of the few instances of banks not having it all their own way. Notwithstanding banks’ somewhat predictably lax approach to the open banking deadline, this legislation has been designed to remove banks’ monopoly on our banking data, thereby allowing innovative firms to help us get more value from it.
Why can’t I get reports on how much I spend at McDonald’s per week, month and year? How difficult is it to automatically split my funds into different ‘pots’ to help me save money? Why is it so hard to set up a new payee through my bank, when mobile payments are a thing?
These are the kinds of use cases open banking will enable, alongside, for businesses, benefits like compelling cashflow management tools and apps that help you access finance faster.
The features and tools consumers are starting to enjoy with apps like Monzo, Starling and Revolut will become the norm with open banking. How soon they become the norm will depend on how quickly someone from the fintech pack can demonstrate breakthrough value to the average consumer. Until then, newspaper headlines are all they have to go on.
