Open banking education needed in US, survey finds

As open banking capabilities power fintech innovation around the globe, a consumer survey published by API provider Axway on Aug. 10, 2021, shows half of U.S. citizens have neither heard of open banking nor understand its true potential. Also, while 81 percent of Americans surveyed believe their existing financial institutions can meet day-to-day needs, researchers found that 40 percent of respondents are already engaging in open banking activities by sharing banking credentials with third-party software providers.

Evan Sivan, head of open banking at Axway, suggested the study highlights a teachable moment for U.S. consumers and service providers. "People still trust and need their banks, but these new FinTechs are offering amazing tools that people really want to use," he said in a statement. "Open banking is the solution to making sure traditional financial institutions and FinTechs can work properly – and securely – together."

Sivan further noted that half of survey respondents failed to grasp the central premise of open banking, which he stated is basically about letting people control their money. Open banking capabilities, powered by shared APIs, enable software providers and financial institutions to design products and services that remove friction from commerce and improve the customer experience, he added.

Open yet secure

Another misconception cited in the Axway study is the idea that open banking is less secure, Sivan noted, stating this is not the case. He proposed that open banking would give people "significantly more control over their financial data than they have now, as well as improving security in general."

While underpinning technologies are not always visible to end-users, open banking systems are heavily regulated and subject to strict security and compliance guidelines, Sivan stated, adding that the issue is about more than compliance or regulation. More importantly, he pointed out that it's about fully participating in the digital economy of the 21st century and opening up silos to allow data to "be controlled and leveraged by its rightful owner: the individual who created it."

With half of survey respondents distrusting open banking, Sivan emphasized the need for education, citing the following data points: Researchers found 33 percent of respondents were concerned about constant monitoring of their financial activities and 47 percent worried about losing control over access to their financial data. In addition, 27 percent of U.S. consumers surveyed were concerned that third-party service providers would use their personal data against them.

Bank transformation

Evolving open banking laws in Europe and Australia suggest that open banking will continue to gain momentum, even in the United States, Sivan noted in an Aug. 10, 2021, blog post titled, "Consumers are starting to sense an open banking transformation."

"Open banking puts the standards and technologies in place that make data ownership and consent possible," Sivan wrote. "It also leads to better customer experiences, like greater ease in transferring money between accounts, and more innovative financial products that increase financial utility."

Sivan also indicated that the Axway survey found 21 percent of Americans had written a check from one bank and cashed it in another, and 16 percent withdrew cash and physically deposited it in another bank. Open banking would eliminate these friction points, he noted.

Moving money around can be confusing, obtuse or expensive, Sivan acknowledged; however, he added that open banking "would help do away with arbitrary institutional lock-in and make for smoother customer experiences."

A copy of the survey and accompanying blog post are available at:  blog.axway.com/commentary/consumers-are-starting-to-sense-an-open-banking-transformation

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