Money truths

Open Banking and the Challenges of Behaviour Change

If you are someone who, like the team at Truth, is involved in understanding financial services innovation, then you are likely to be familiar with Open Banking. This is the government-backed initiative that means consumers’ banking data (with their express permission) can be shared easily with third parties. This has heralded a potential revolution for the retail banking industry. Open Banking was launched by the Competition and Markets Authority (CMA) with the express intention of increasing competition. Open Banking should enable consumers to have easier access to better deals and products.

Though it has been in place for most of this year, it seems that Open Banking has (thus far) passed consumers by. In August a YouGov poll showed that only 28% of adults in the UK are aware of it.

This is exactly the type of challenge we often come across at Truth. A new product, service, policy change or technological advancement appears revolutionary to those closest to it. But remains a long way from entering consumers’ consciousness or influencing their behaviour.

But by considering consumers’ everyday lives with empathy (and some theory) this disconnect becomes much more easily understood. We can understand it by considering layers of influences on consumers’ lives. Each additional layer adds greater weight of influence that may – one day - create breakthrough moments.

One layer of influence is our individual behaviour and psychology.  Behavioural economics (BE) is fully entrenched as a way of helping us understand human behaviour. BE has sensitised us to the short-cuts we use to make decisions and navigate the myriad of choices confronting us every day. As a result of this surfeit of choice, people typically fall back on existing habits and routines. In fact, we find them safer. So people renew the same financial products and stick with what they know, such as viewing accounts with separate providers in isolation through two different apps. Change can involve emotional cognitive costs even if this change could lead to financial gain.

Another layer is cultural influence. These are influences that are deeply embedded (which we are often unaware of) all around us. Cultural analysis allows Truth to get closer to understanding these factors. For example, looking back at the stats from YouGov on Open Banking, over three-quarters of people in the UK are wary of sharing their financial data with companies other than their bank. Culturally, with recent scandals relating to Facebook and a never-ending stream of communication about GDPR, consumers have become much more sensitised to the possible risks to data-sharing.

This is just one potential cultural influence among many – but it provides an example of how in the sea of society, cultural waves can clash against each other. On the one hand the opportunity to share financial data has been enabled by Open Banking – but on the other, this is at a time when consumers may be particularly wary of doing so. Looked at it this way, it isn’t surprising that for now an initiative that enables data sharing hasn’t particularly piqued consumer interest – despite potential benefits.  Because as we know from behavioural economics, faced with active decisions and an option to break with the status quo we often fall back on inertia.

Even when Open Banking does deliver tangible benefits to consumers, this may not be enough to drive awareness. Because Open Banking is going to be the engine driving new propositions, services and offers – not the offer itself.  So it is reliant on compelling products and services to take on real meaning.

To truly understand the impact this potentially revolutionary change in the retail banking sector could have on consumers, we need to unpack their lives. This is so we can understand the layers of influence that point to a breakthrough in their use of a new service or product and make sure we aren’t missing a hidden revolution of behaviour change which consumers cannot identify directly, but which is no less influential on their lives. That is to say, their lives and finances are being impacted on by Open Banking, but they don’t know – or need to know – this is the engine behind their cheaper deal or improved budgeting tool.

The brand behind this service or offer will also be an important factor in consumer decision-making - and here a really interesting aspect of Open Banking emerges. Will consumers fall back on the ease of trusting existing heritage brands in the retail banking sector – or be open to other well-known brands such as Google, Amazon or Apple playing a stronger role in their financial lives?  Or ever further yet, will this open opportunities over time for challenger fintech brands such as Revolut and Monzo? This is yet to unfold.

So, Open Banking – perhaps a revolution for the sector…  But if we take an empathetic approach it is not difficult to see why this isn’t a revolution (yet) for consumers. This highlights the importance of taking a people-centred approach, one which uncovers layers of influence across individual, social and cultural spheres to understand how new initiatives – such as Open Banking – can and will influence consumers’ lives in the future.