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In a survey of just over 2,000 consumers, Deloitte uncovered how Australian customers of banking products are likely to respond to the open sharing of their information.
“The intent of the Consumer Data Right and open banking is to give customers choice, convenience and confidence,” explained Deloitte open banking lead Paul Wiebusch.
“We wanted to understand which organisations people trust with their money, and their information, what they value and why.
“We explored how willing people are to share their information, and how often they had changed their banking product providers in the last three years, and what had triggered their decision to switch.”
Overall, the results suggested that consumers trust their banks with their financial information, and believe transparency in how their information will be used and shared is critical to embracing the idea of open banking.
Consumers, particularly of younger generations, are aware that they have other options available for their financial product needs, although usually are satisfied enough not to bother making the switch, according to the results.
However, those who have decided to make the switch often state that doing so wasn’t as difficult as they might have previously thought.
Notably, the results also showed that one in five consumers intend to switch banks or providers within the next 12 months, with better value to be found elsewhere.
The survey itself revolved around five key areas, which Mr Wiebusch believes will “play a large role in the success of banks in an open banking ecosystem”, which consist of trustworthiness, security, engagement with information, switching behaviours and value.
The key findings from Deloitte are as follows:
Trustworthiness is key
- Australians tend to distrust most organisations
- People do trust traditional banks to keep their money safe (prudential trust)
- They also trust traditional banks to keep information about them and their financial transactions secure (information trust)
- However people don’t trust that banks have their best interests at heart (relationship trust)
Privacy, security, transparency
- Sixty-five per cent said trust was essential when deciding whether to provide personal information
- Transparency over how customer information is used and shared is critical
- Organisations need to clearly communicate why customers should share their data – the value created for the customer
- People are three times more likely to share their data with ‘an accredited third party’
Engage – gathering information
- Most people do not actively seek information about other offerings
- But half of Millennials (Gen Y) and post-Millennials (Gen Z) do
- Most of those that gather information, do not end up changing their provider
- But when data recipients are accredited, people’s willingness to share data triples
Switching: Know your customers – retention is cheaper than acquisition
- Most people are satisfied with the current provider of their banking products
- Seventy-six per cent of people have had their banking relationship for over five years
- Behavioural biases can stop people gathering information or switching providers
- Switchers are more likely to be better educated and have a higher income
- Switchers are more likely to be tech-savvy and Millennials (Gen Y)
- For most products, switching is not seen as difficult – mortgages are the exception
- Once someone has switched, they realise it’s not as difficult as they might have thought
- Thirty-three per cent of people still experience pain points, particularly for mortgage lending
It’s all about value
- Twenty per cent of people intend to change the provider of a banking product in the next 12 months
- What’s important to people differs across banking products and generations
- Better value is most important
- Other product features and services also influence customers’ choices, like the ability to consolidate finances, better customer service, and more convenient banking.
Robin Scarborough, Deloitte customer partner, and a contributor to the Open Banking: Switch or Stick?, report commented on the results, and gave financial institutions some tips on maintaining customer satisfaction in the era of open banking.
“With open banking now just around the corner, it is important for all organisations – incumbents and challengers – to change their focus from just compliance with the CDR legislation, to developing propositions that deliver value for customers,” Mr Scarborough said.
“People leave banks for many reasons including the pursuit of better value, dissatisfaction with the quality of service, lack of trust, convenience, and bank reputation.
“To attract a customer, having a point of difference is critical.”
While open banking is likely to increase competition among banks, non-banks and financial providers, Mr Scarborough encouraged providers to see it as an opportunity to support their customer bases.
“All banks, incumbents and challengers, and also potential non-bank competitors, need to see open banking as an opportunity,” he said.
“This requires focus on developing propositions that solve customers’ problems in a way that delivers value to that customer.
“In the UK, account aggregation, personal financial management, and SME financial management propositions have been the initial areas of focus.
“There is a clear opportunity for banks to create the right experiences to meet customers’ needs. This opportunity is amplified in an open banking environment, as greater data sharing facilitates new offerings, and increases the potential for real-time credit decision making.”
Mr Scarborough concluded: “However, the lack of financial and data literacy in Australia is probably one of the key impediments to consumers realising benefits from open banking.”
With the start of open banking just a few months away, Deloitte specified that organisations should:
- Ensure they can meet their compliance obligations under the Consumer Data Right legislation, rules and standards – both as a data holder and as a data recipient.
- Understand operationally what processes and controls need to change as a result of the introduction of open banking: credit assessment and pricing, data governance, data analytics, responsible lending and conduct, financial crime and more.
- Understand strategically how open banking and the emerging open data economy may impact the organisation’s strategy, and its products and services, and target customers and the eco-system in which the organisation operates.
[Related: Consumers unnerved by rate cuts]
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