Consumers not aware of open banking

Knowledge about Australia’s sweeping open banking regime, which begins in two months, is at dramatically low levels.

Knowledge about Australia’s sweeping open banking regime, which begins in two months, is at dramatically low levels, a new survey has found.

More than three-quarters of 1000 people surveyed last month by market research firm PureProfile said they didn’t know about open banking. Just 11 per cent of respondents knew what open banking was.

From February, the major banks will be required to provide customers access to their data for deposit and transaction accounts and credit cards. Mortgages and personal loans come under the regime from July, while smaller banks have a slower implementation timeline.

Legislation clearing the way for open banking was passed in August. Open banking makes it easier for consumers to switch providers and forces banks to share an individual’s data when permission is granted.

The PureProfile survey highlighted the biggest concern about open banking, centred on security of an individual’s data, with almost half of respondents saying they were not comfortable sharing their data with other banking and financial services providers.

In the UK, open banking began early last year but take up was slow and below expectations, even though, more recently, momentum has improved.

In last month’s local parliamentary committee hearings ANZ chief executive Shayne Elliott said he viewed the open banking change as an opportunity to win market share.

“We will be ready to comply with the requirements on the timetable that’s set out at present. We see it as an opportunity for ANZ and it will increase competition,” he said.

Chairman Phil Chronican said NAB was “broadly on track” for the February start of open banking but warned the Australian Competition and Consumer Commission’s deadline was tight as it was still building a registry and testing systems.

“We are working with the ACCC-led team to ensure the registry is built and tested so whatever is released in February is secure and doesn’t expose customers to data breaches or fraud,” he said.

“The timetable at this stage is looking tight from the point of the industry-wide work.”

An ACCC spokesman said the register build and testing was on track: “The ACCC acknowledges it is running to tight timetable for implementation of the Consumer Data Right.

“We are working with industry participants to undertake necessary testing in advance of the Consumer Data Right’s launch. The ACCC and its testing partner, EY, is meeting regularly with banks and data recipients involved in the testing program and monitoring very closely preparations and readiness.”

The open banking survey was commissioned by communications agency Hotwire to test consumer knowledge and appetite to participate in open banking.

The survey showed that 49 per cent of respondents felt they were paying too much for banking and financial services and 23 per cent said they planned to take advantage of open banking in the next 12 months.

“Open banking is a huge opportunity to present consumers with fresh alternatives and shake up the financial services industry overall,” Hotwire Australia’s managing director, Mylan Vu, said of the survey results.

“However, these changes won’t be as fast and dramatic as we’ve seen with other disrupted industries because it involves people’s money and data.”

She added fintech companies were struggling with issues around consumer awareness as they attempted to chip away at the market share of incumbent players. It’s also been tough for digital banks and fintech players to pick up market share in the US.

Research published last year by Cornerstone Advisors found that, across a range of 50 start-ups in the US, only a handful had managed to reach 1 per cent consumer penetration.

The report showed there had been only limited traction in payments for Google Wallet and other providers.

Moody’s Investors Service released a report last week that listed open banking among a string of factors that would weigh on the Australian banks’ future profitability, alongside record low interest rates, regulatory change and weak credit growth.

“Technological innovation and access to data that enable customers to switch banks more easily will weaken the major banks’ customer bases,” the report said.

“There are indicators that the major banks’ customers could be open to switching their banking relationships … the top four banks’ reputation has been hurt by findings of misconduct by the royal commission.

“Reflecting this, the major Australian banks have been falling in the Reputation Institute’s reputation rankings over the past year, with ANZ and NAB dropping the most.”