Roundtable: Open Banking and financial health

Last month saw the introduction of Open Banking, which requires the big banks to “open up” the data they hold on customers. The initiative promises to drive competition in finance, but with 90% of people unaware of the changes a wider public debate on the “data revolution” in finance is needed. To kick things off, here’s a range of views from across the Lab’s community:

What is Open Banking?

Banks have always held a wealth of interesting information about our money and spending habits. From 13 January, Open Banking required the nine biggest banks to make it possible for customers to share their current account data with third parties, using a new set of standards designed to make the transfer of data consistent and secure. Combined with new EU-wide rules, the changes mean that new players in finance, ranging from start-ups to big tech companies, will be able to access people’s transactions data – and in some cases, to make payments on their behalf.

What does Open Banking mean for financial health, economic inequality and citizen power?

Some think that Open Banking is an unprecedented opportunity to help put people in control of their money:

Open banking is the first regulation of its kind, opening data that banks hold on customers and providing new ways to pay that really challenge the norm. But the most exciting part of all, is when that data and payment capability are combined to automate a lot of the hard tasks people face in their daily life. Busy people who aren’t so literate in finance shouldn’t be penalised and left behind because they have less understanding of the system .

Jamie Campbell (Head of Awareness, Bud)

Others warn that the opening up of people’s payment data risks disempowering or even harming customers:

I am concerned that the very positive benefits to people’s lives offered by sharing their account data via Open Banking could be lost unless there is a duty of care on firms to act in the best interests of consumers. There’s a lot of potential to improve how companies explain their products to consumers and layer information in an engaging way, so people take time to understand what it is they are signing up to and how their data will be used.

Faith Reynolds (Independent)

So far, for most customers, we see little reason to believe Open Banking will produce the same step change as, for example, the humble ATM, debit card, and direct debit. The almost evangelical hype around Open Banking does not match even a cursory objective assessment of the potential.

There are number of major potential risks which have not been considered in any meaningful detail. Open Banking heightens the risk of scams and fraud; makes it harder for consumers to exercise rights and redress; could introduce higher costs in the supply chain and greater financial exclusion and discrimination; increases the risk of misselling and misbuying by consumers, and wider exploitation of embedded behavioural biases and vulnerable consumers; creates transition risks; and creates new corporate governance, cultural risks and regulatory risks.

Mick McAteer (Co-Director, Centre for Financial Inclusion)  

A way forward

At the Finance Innovation Lab, we think that if a “data revolution” is coming, we should use it to support innovations that help people feel in control, prepared and calm in relation to their finances.

On 8 February we’ll bring together experts from banking, fintech, civil society and policy making to share knowledge and generate ideas about how to minimise the risks and harness the opportunities of Open Banking.

Keep an eye on our Twitter for live updates and watch out for our follow-up report after the event! Let us know your view too @thefinancelab.

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