Open Banking is expected to give rise to new products and services, designed to help consumers and businesses manage their money in quicker, simpler and more convenient ways.
The legislation was created to make the whole sector more competitive and accelerate the pace of change within the industry. New entrants such as FinTech startups will take advantage of the opportunities offered by Open Banking and emerging technologies to create innovative services. A survey by PwC suggests that consumer banking and payments are the sectors most likely to be disrupted in next five years, and bankers estimate they could lose up to 24% of their business (source: ‘PwC, Blurred Lines, How Fintech is shaping Financial Services, Global Fintech Report, March 2016)
So, what can banks do to prepare themselves? This presents a conundrum. If they communicate too enthusiastically about Open Banking, they may risk losing customers by sending them to the new competition. If they don’t make a fuss about Open Banking, they risk damaging trust when customers become aware of what is possible: “Why were they hiding this from me?’ So what is the best way for banks to communicate the changes afoot?
Our view is that trust, disclosure and transparency need to prevail. It seems fit and wise for banks to communicate the wider benefits of Open Banking to their customers in the simplest and most compelling way possible, and try to leverage the benefits of Open Banking both for themselves and their customers. However, there is an additional challenge: how do you reconcile this with years of consistent messaging around the need to safeguard personal information?
Banks are now grappling with the complexity of flipping the story from ‘don’t share your data’ to ‘it can be appropriate, even advantageous, to share your data in certain situations’. This may be a nuanced message but, if not communicated clearly, there is another potential trust pitfall around inconsistency of messaging. For example, you might remember a recent TV commercial for one of the major high street banks, featuring a woman in a call centre, posing as a bank employee and tricking a customer to reveal their full PIN over the phone. Pretty stark and disconcerting. How challenging will it be for the same bank to start encouraging its customers to enjoy the benefits of Open Banking, having just spent £10m on a campaign alerting them to the risk of sharing personal details?
Not that caution is inappropriate. Cyber fraud and crime is a rising concern among the general public, and so is the use of personal data collected online by companies. From our Ipsos Global Trends 2017 survey, we know that nearly three-quarters of people (71%) say they are concerned about how information collected about them online is being used by companies – unsurprising following the many security breaches from organisations as diverse as TalkTalk, Phamacy2U, Yahoo, Tesco Bank, Target and the NHS.
This raises a number of questions: will the convenience, speed and simplicity of Open Banking come at the expense of a reduction in privacy or security? And who will win the battle for trust in this new world of Open Banking?
Encouragingly for the established banks, they enjoy a privileged position in the minds of consumers, who see them as the most trusted to use ‘information they have about you in the right way’ (46% versus 26% Social Media websites, Source: GTS Ipsos). This suggests they are in a strong position to take advantage of the new opportunities presented by Open Banking.
So, what could a win-win look like in Open Banking for the established players? Ways we believe established players can win include:
- Addressing the contradiction head on: Banks need to capitalise on latent trust and act in transparent ways. One way might be to compare and contrast old and new world, i.e. acknowledge previous communications about protecting privacy and clearly explain how Open Banking isn’t creating greater risk and. how banks can help create smart and secure ways that their customers can benefit from Open Banking.
- Maximising value to the customers: Ipsos research confirms that new propositions based on Open Banking will be of interest to consumers. As well as promoting the benefits of Open Banking generally, banks need to help customers access lots of Open Banking related benefits by offering them new products and services offering real value.
- Careful testing of propositions and key messages: Banks must consider their research approach to ensure behavioural science principles are fed into the research design – e.g. how do you account for passive consumption of advertising messages? Research participants should be encouraged to think holistically and take into consideration the brand’s communications and history, and co-create with them to find a way to make sense of seemingly contradictory messages.
In conclusion, the financial services sector seems set to face significant disruption. However, trust is a powerful asset for banks, that needs to be leveraged. With good communications planning and placing customer relationships front and centre in design, banks have the opportunity to create meaningful new value for their customers, and with it, a new dimension to customer loyalty.
Has the Digital Banking revolution finally started? The FinTech landscape in 2018
Spurred on by Open Banking, advocates of FinTech are forecasting a revolution in the financial services sector. But with the change seemingly slow to happen, Tom Erasmus asks will the latest innovations finally overcome consumer inertia?