"We also have to be ultra-sensitive around the fraud threat and therefore help explain and educate clients about the security in place and the protections they will be afforded "
For those that might have had their heads in the sand for the past six months or so, Open Banking is designed to open up the bank accounts of individuals and to allow third-parties access to that data. For those in financial services you can understand why ‘revolution’ has been the additional word of choice when looking at Open Banking because this sharing of bank details can deliver greater certainty in terms of checking mortgage affordability, for example, or indeed ascertaining the true spending habits of customers and thus ensuring they’re in the right financial place to be able to afford products.
It can also sign-post product need and, from an adviser point of view, it should give far greater clarity and certainty. I’m not suggesting that clients can be ‘economical with the truth’ when it comes to the true state of their finances but the use of Open Banking could help get to the truth far earlier in the process without the constant to-ing and fro-ing we sometimes have now, especially as advisers seek to clarify what the real situation is.
Now, this future utopia does sound great but, at present, we appear to be a long way from it, and there are a number of reasons why. Open Banking is being driven by the Competition and Markets Authority and, back in January when we had the ‘launch’, only four of the nine banks that were allowed to take part were actually up and running. Plus, in terms of the third-party companies that will be needed in order to facilitate the accessing of individual’s banking details, the FCA have only authorised a very small number, some of which you will no doubt be aware of already.
In a sense, you might be surprised to learn, this is only the smaller piece of the problem pie. Of course, more banks need to be mandated into the process; of course those banks who are mandated need to be operational; and of course we will need more authorised firms to deliver the apps and systems to allow the data to be utilised in order to get the outcomes we need, but time will ‘probably’ deliver all of the above.
The bigger problem will be getting consumers to allow firms to access their banking data and here the whole ‘Open Banking revolution’ could hit some major obstacles. We live in times where consumers are constantly under the threat of fraud, especially when it comes to online activity and fraudsters gaining access, via the internet, to our bank accounts. That fraud threat could be a major reason why consumers won’t provide the permission required to access their bank accounts.
Now, again as time goes by, this might well become more of the norm but there’s absolutely no doubting that criminals will be viewing Open Banking as an opportunity to access that data as well. We could well have false firms set up who purport to be authorised and who have the technological means to secure access – it could simply be fraudsters seeking to gain passwords or pin numbers (a threat that always exists) but it could also be tagged onto an ‘Open Banking’ access ‘story’ in order to gain those details.
At present, the threat of fraud is high on the agenda for most people; indeed recent research via Accenture found that 69% of consumers might ‘deny third-party access to their financial information’. Such lack of engagement would put a serious dent in the hopes of those who see the Open Banking revolution delivering significant benefits to the entire financial services community.
So, we as an industry have to be careful here. For a start, the environment does not yet exist to be an Open Banking ‘zealot’ so we’ll need to allow time for a catch-up in that regard. It’s also interesting that, at the recent FSE Wales event, Simon Read of Magellan Homeloans bemoaned the fact that those banks involved initially appear to be in no rush to get themselves ready; neither said Read are they too bothered about helping other lenders get to the point where they can benefit from Open Banking. Read suggested this allows those initial banks to keep a competitive advantage – one they don’t want to offer out to the rest of the market.
But, when we are in a better position than now, we also have to be ultra-sensitive around the fraud threat and therefore help explain and educate clients about the security in place and the protections they will be afforded if they allow access to the data. Not forgetting of course the advantages in terms of sharing information, cutting down on paperwork, and allowing the adviser to have the necessary data in order to fine-tune the product recommendation.
These will all be major benefits when the Open Banking ‘industry’ gets its house in order; until then we should perhaps keep a watchful brief and be ready to go live with those messages when we encounter clients who are in a position to benefit from it. Viva le revolution!
