Easy switch to see borrowers up and go? Don’t bank on it

There is negligible consumer awareness of open banking and a reluctance by many to change providers, a survey has found.

Most people have not heard of the open banking legislation

The open banking system will confront huge challenges around customer inertia, a survey has shown, as the competition regulator works towards a July start despite acknowledging some players “require flexibility”.

The COVID-19 pandemic has the banks and other lenders scrambling to help customers weather the economic storm, but they are also bound by regulatory changes that are coming into force this year. One of those is the open banking regime, which makes it easier for consumers to switch providers and forces banks to share an individual’s data when permission is granted.

A survey of 1000 consumers, conducted last month, revealed negligible awareness of open banking and a reluctance by many to change providers. It was undertaken by global information services group and credit bureau Experian.

The survey showed 54 per cent of respondents only banked with one provider and a third banked with two, the majority of which were traditional lenders.

It also found 44 per cent didn’t believe switching banks would lead to a better outcome, with 9 per cent saying they would sooner move house than change banks.

The research of Australians and New Zealanders revealed 59 per cent of respondents had never heard of the open banking legislation, passed last year, and just one in 10 understood what the new system would mean for them.

“Consumers know very little” about open banking, said Simone Jemmett, Experian’s local strategy and new markets boss. “That competition and innovation is meant to benefit the consumer.”

She added consumers would only shift when there was more value or personalisation on offer.

An Australian Competition & Consumer Commission spokesman said while COVID-19 was causing disruption, many stakeholders were still keen to ensure “value is realised for the work done to date”.

“The ACCC has had discussions with banks and other stakeholders to assess the emerging impacts of COVID-19, and we are currently considering those impacts and a range of options to ­respond,” he said.

“We are continuing to work ­towards a July 1, 2020, start date for sharing transactional data, though we recognise that responding to the COVID-19 pandemic may require flexibility.”

The regime has already been hamstrung by several delays, with the most recent pushing the start date to July from February.

In a tougher economic environment it was “even more important” for people to understand their financial health, Ms Jemmett said, noting the industry had to better inform the public on open banking.

“There is no doubt that trust is going to be integral to the success of the open banking regime.”