With open banking due to be introduced in February 2020, Deloitte studied how consumers are likely to react to the sharing of their banking information.
In a survey of just over 2,000 consumers, Deloitte uncovered how Australian customers of banking products are likely to respond to the open sharing of their information.
“The intent of the Consumer Data Right and open banking is to give customers choice, convenience and confidence,” explained Deloitte open banking lead Paul Wiebusch.
“We wanted to understand which organisations people trust with their money, and their information, what they value and why.
“We explored how willing people are to share their information, and how often they had changed their banking product providers in the last three years, and what had triggered their decision to switch.”
Overall, the results suggested that consumers trust their banks with their financial information, and believe transparency in how their information will be used and shared is critical to embracing the idea of open banking.
Consumers, particularly of younger generations, are aware that they have other options available for their financial product needs, although usually are satisfied enough not to bother making the switch, according to the results.
However, those who have decided to make the switch often state that doing so wasn’t as difficult as they might have previously thought.
Notably, the results also showed that one in five consumers intend to switch banks or providers within the next 12 months, with better value to be found elsewhere.
The survey itself revolved around five key areas, which Mr Wiebusch believes will “play a large role in the success of banks in an open banking ecosystem”, which consist of trustworthiness, security, engagement with information, switching behaviours and value.
The key findings from Deloitte are as follows:
Trustworthiness is key
Privacy, security, transparency
Engage – gathering information
Switching: Know your customers – retention is cheaper than acquisition
It’s all about value
Robin Scarborough, Deloitte customer partner, and a contributor to the Open Banking: Switch or Stick?, report commented on the results, and gave financial institutions some tips on maintaining customer satisfaction in the era of open banking.
“With open banking now just around the corner, it is important for all organisations – incumbents and challengers – to change their focus from just compliance with the CDR legislation, to developing propositions that deliver value for customers,” Mr Scarborough said.
“People leave banks for many reasons including the pursuit of better value, dissatisfaction with the quality of service, lack of trust, convenience, and bank reputation.
“To attract a customer, having a point of difference is critical.”
While open banking is likely to increase competition among banks, non-banks and financial providers, Mr Scarborough encouraged providers to see it as an opportunity to support their customer bases.
“All banks, incumbents and challengers, and also potential non-bank competitors, need to see open banking as an opportunity,” he said.
“This requires focus on developing propositions that solve customers’ problems in a way that delivers value to that customer.
“In the UK, account aggregation, personal financial management, and SME financial management propositions have been the initial areas of focus.
“There is a clear opportunity for banks to create the right experiences to meet customers’ needs. This opportunity is amplified in an open banking environment, as greater data sharing facilitates new offerings, and increases the potential for real-time credit decision making.”
Mr Scarborough concluded: “However, the lack of financial and data literacy in Australia is probably one of the key impediments to consumers realising benefits from open banking.”
With the start of open banking just a few months away, Deloitte specified that organisations should:
Hannah Dowling is a journalist for The Adviser and Mortgage Business.
Prior to joining Momentum Media, Hannah worked as a content producer for a podcast catering to property investors. She also spent six years working in the real estate sector at a local agency.
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