Open banking offers exciting and powerful ways to reshape people’s and businesses’ experience of financial services.
However, despite the opportunities open banking will deliver to consumers, in terms of opening up access to new products and services, a new approach to regulation and better consumer protection and education against the risks associated with the new offerings are needed.
These are the finding of the “Open Banking: A Consumer Perspective” report, which was commissioned by Barclays and authored by former government advisor Faith Reynolds. According to Reynolds, open banking can bring potential benefits to consumers, including helping them aggregate their financial products in one place, providing them with insight on spending patterns and making recommendations to them on how to save money. It can also spur more personalised services and widen consumers' access to financial products, including credit, debt advice or financial advice. And yet, open banking could create "more conflicts of interest, exploit asymmetries of power or exacerbate digital and financial exclusion. Convenience, speed and simplicity may come at the expense of losing more control of our money and data, a reduction in privacy or security and a more complex marketplace".
Maximising the potential of open banking and addressing the concerns “requires action: new approaches to regulation, strategies for protecting consumers in the new data-driven economy and transparency from government about how it uses our data", according to the report.
Reynolds called on the Financial Conduct Authority (FCA) to "publicly discuss its understanding" of those potential conduct risks and "how such risks could be mitigated to inspire confidence, working with other regulators where appropriate". In addition, the FCA should work with other UK members of the UK Regulators Network to "assess regulatory requirements for third party providers in the new open banking environment".
The FCA should also carry out a holistic review of "the interplay between the business models used by established players versus new entrants, level the playing field and get rid of conflicts of interest which harm consumers", the report indicates. Reynolds also identified a need for a new "clear cross-cutting strategy" from UK regulators on how they will collectively "regulate in a new data driven economy".
In recent news, Equifax reveals that 90% of Brits have not heard of the open banking initiative, with 45% of respondents claiming that they are not likely to use open banking when it becomes available.