FIs Must Connect the Dots on Open Banking for Consumers: Mambu

Open banking: It's a process that allows fintechs to access bank customer or credit union member data through a financial institution's open application programming interface (API), and build consumer-facing products and tools around it, theoretically resulting in a more streamlined approach to personal financial management.

But while most consumers are in favor of the byproducts of open banking – having all their financial information aggregated in one place, using budgeting apps and receiving fast, secure payments, to name a few – a majority also said they're either not on board with open banking or don't understand what the term means, a new report from banking and financial services platform provider Mambu said. That means financial institutions are doing a poor job of explaining what open banking is and touting its benefits, according to the report, which was based on a survey of 2,000 global consumers conducted in March 2021 and is the first in a new Mambu research series called "Disruption Diaries."

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Fifty-two percent of consumers surveyed said they had never heard of open banking, 61% said they'd never used it and 60% said they didn't like it; however, 80% said they use one or more mobile finance apps, the report said. Fifty-seven percent said their biggest concern in regard to open banking is data sharing, 43% believe open banking is a dangerous use of data sharing, and about half of consumers blamed their financial institution for their lack of knowledge on the subject – 49% said their institution didn't explain the benefits of open banking when introduced to it, and 51% said their institution dropped the ball when supporting them with open banking.

Indicating a potentially brighter future for open banking, however, the report also found that during the pandemic, consumers' attitudes have shifted toward behaviors and desires that align with the concept. Fifty-one percent said they have had to take more control of their finances, 41% have had more time to research their financial services and understand them better, 40% said their attitude toward privacy has changed, 24% are less worried about sharing data and 40% have had more time to set up financial services tools. "These are encouraging trends," the report stated. "But it's important to remember that some customers will revert to previous behavior once restrictions on social distancing are lifted. After all, our survey showed that 48% of customers remain scared of open banking."

Despite their fear of the concept, 57% of consumers said they would be more likely to use open banking if their financial institution had more successfully implemented it and promoted it. They also revealed which features of open banking they'd be most likely to embrace: Making instant money transfers between different accounts (48%), seeing different account balances together at a glance (38%), automatically boosting savings by calculating spending patterns and moving spare money into savings or investment accounts (36%), receiving helpful money management tips (34%), receiving one overall monthly bank statement (34%), and allowing access to banking data to receive automatic suggestions about money savings on bills and insurance (26%).

Mambu recommended that financial institutions change the language around open banking – instead of using the widely misunderstood term, they should promote the concept of "smart banking" or something similar. "Consumers value transparency and clear, simple language in communications. We don't have the answer, but something more along the lines of shared, smart or collaborative banking could be interesting," the report stated.

In a news release announcing the report, Mambu Chief Customer Officer Elliott Limb said while the research showed the majority of consumers don't understand much about open banking, "it also reveals they do care about receiving better financial services that support their lifestyles – smart banking. If banks address this need and lack of understanding, it will help banks build customer loyalty and provide genuinely innovative, differentiating, revenue-generating services."

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Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.