The UK’s open banking era may have commenced on January 13, 2018, but it did so in an underwhelming fashion. In fact, the launch has been marred by a failure of most banks to meet the deadline, public suspicion, and sceptical media coverage.
The Competition and Markets Authority (CMA) had mandated the UK’s nine largest banking providers to make their systems compliant with the new legislation by the launch date.
However, six of these – including Barclays, HSBC, Nationwide, and RBS – failed to meet the deadline and have been given up to six more weeks to comply. Given the length of time that banks have had to prepare, this is somewhat disappointing.
Nevertheless, the delay should only prove a temporary snag – all banks should have their APIs activated by the start of March, assuming no further slippage. A bigger challenge is posed by consumer wariness, fomented by mainstream media coverage that has focused as much on the perceived security risks of open banking as on the benefits.
Typical is The Guardian’s recent article ‘Open banking’: radical shake-up, or a threat to your private data?, which alongside a summary of the changes and a description of the positive impact upon consumer outcomes, discussed the risks of using unproven third parties. Even The Sun followed suit with its story FRAUD ALERT What is Open Banking? When does it start? Are your details at risk from fraud?.
In addition, up until a few weeks before the launch date, the media had barely discussed open banking at all. Consequently, consumers have been left in the dark, with a survey conducted in August–September 2017 by Which? revealing that 92% of consumers had never heard of open banking.
Although recent press coverage will have reduced this percentage since then, first impressions count, and a high proportion of consumers are likely to be put off by the negative slant of much of the initial coverage. Confirming this, research by Accenture has found that 69% of consumers would not want to share their data with third parties, and 53% intend to avoid open banking altogether.
Open banking legislation, which was conceived in order to increase competition and reduce the dominance of the biggest banks, may therefore fall short of its objectives. If fintechs and other challengers were hoping that open banking would be a magic bullet that would help them to quickly and significantly scale up, they will almost certainly be disappointed.
For obvious reasons, the main banks do not want to publicize the benefits of open banking, so it is up to the CMA, which ordered the change in the first place, to embark upon a comprehensive publicity campaign to educate the public. It must act soon before consumer skepticism becomes entrenched.