Bank customers want high-touch services, but wary of open banking

Customers in North America want the high-touch services that open banking can provide, but are concerned with the need for data-sharing with third party providers, according to new research from strategy and marketing consultancy Simon-Kucher & Partners.

‘Open banking’ enables banks to share customer data with rapidly proliferating fintech firms and third-party financial apps in a more secure fashion. Before open banking, customers would just give their login info and account details to the app, and it would ‘screen scrape’ to get the needed banking info – a less than ideal process in terms of security.

With open banking, third-party apps get access through application programming interfaces (APIs), a means of connecting two software components and transferring data. APIs also allow the development of other apps, while streamlining the whole process in terms of documentation and admin. APIs are also, critically, a more secure method of data sharing than the previous ‘scraping’ method.

The end point of all this is to create a universe of useful financial applications that can use a consumer’s banking information to offer a wider raft of products and services. By teaming up with third-party partners, banks can offer more diverse and useful digital services to their customers, rather than viewing the issue as simple market encroachment.

Open banking regulation and uptake is much more advanced in Europe, with regulations like the European Union Payment Services Directive 2 compelling banks to open up their monopoly on customer account information – and allowing for third party finance apps to be more viable and secure.

In North America, open banking is less developed, and with little in the way of concrete regulation to guide forward its uptake.

According to a recent Simon-Kucher report, bank customers in North America want more of the high-touch services that open banking can provide. When asked what its current banks were missing in terms of products and services, 44% of respondents said they’d like more personalization and convenience. Ten percent of respondents cited a lack of financial education, planning, and advice services, while 8% tagged “speed of service.”

Bank customers said they were most willing to pay for instant online account opening, pre-filled forms, access to credit scores, and instant online loan approvals.

The report, however, found that North American bank customers had a strong negative perception of open banking and its data sharing. Seventy-five percent said they are unlikely or very unlikely to allow their banks to share their account information and other data with third parties. When they were informed a product would allow a third party to access the database to provide a feature, 39% said they would re-think their feature selections.

In Europe, however, where open banking is much more developed and consumers would presumably be better informed, there was less of an aversion to the issue. According to the report, instead of scaring off customers like it did in North America, the term “open banking” instead triggered a willingness-to-pay for Europeans respondents.