Open Banking is not merely a "bank transfer" or a basic "account-to-account" system. It's a regulated framework enabling third-party providers to access financial data with explicit consumer consent. It's no coincidence that the UK hit 10 million users recently; Open Banking holds a strong promise to reshape the UK's payment landscape for multiple reasons.
Statista projections show that the value of Open Banking transactions worldwide are estimated to grow by more than 500% between 2023 and 2027, from a value of US $57 billion to US $330 billion. Furthermore, Open Banking API calls are estimated to reach 580 billion worldwide by 2027, signifying a huge revenue opportunity for businesses and consumer adoption.
Our recent Open Banking research at emerchantpay reveals a striking contradiction: while 51% of UK respondents shared that they had never heard of Open Banking before, 45% claimed they had used it during checkout once the concept was explained. This disconnect highlights a critical need for education on Open Banking by financial institutions, merchants and payment providers.
Addressing consumer awareness and trust
The path to widespread Open Banking adoption in the UK is paved with challenges, chief among them being the need for more consumer awareness. From our research, nearly a quarter (22%) of consumers familiar with the concept confuse Open Banking with mobile wallets and online banking. Another 16% of respondents said it doesn’t mean anything in particular. This misunderstanding highlights the critical need for clear, targeted communication about Open Banking, its unique features and benefits.
Trust remains a pillar of the payments sector and has been essential for adopting new technologies. Open Banking is no exception. Though it holds significant potential, psychological obstacles prevent widespread adoption by many consumers.
One of the main concerns is the fear of private financial data being accessed by unauthorised parties. However, it’s important to clarify that, with Open Banking, sensitive financial data is only shared with authorised parties. This is done only with the consumer’s explicit consent, ensuring they are aware of who is accessing their information. This level of transparency is crucial to building trust. In addition, Open Banking relies on bank-level security protocols, offering the highest level of protection available. By highlighting both the consumer’s control over data sharing and the robust security measures in place, concerns can be alleviated and trust can be fostered in the technology.
The power of education in building trust is crucial. Currently, there is a significant gap in educational efforts, with 66% of respondents saying they had yet to receive any information about Open Banking from their banks. However, when given a clear definition of Open Banking, 44% of UK consumers trusted it to protect their financial and personal data. This shows how consumer education can directly influence the adoption of Open Banking in the UK. Hence, merchants, financial institutions and PSPs have a substantial opportunity to improve their educational efforts and take a more active role in promoting the adoption of Open Banking.
By tackling awareness and trust issues directly through comprehensive educational campaigns, stakeholders in the financial services ecosystem can boost adoption and usage. Clear and consistent messaging about Open Banking's security features and benefits will be key. This approach will help dispel misconceptions and build the trust needed for widespread acceptance of this innovative payment technology.
Strategies for effective Open Banking consumer education and trust building in the UK
Adopting a demographic-specific education approach
To effectively promote Open Banking adoption, stakeholders in the financial sector could collaborate to deliver unified and tailored educational strategies for different age groups. Using these diverse channels could prove vital to reaching all demographics. Social media and podcasts might appeal more to younger users, while older consumers may respond better to local community workshops, brochures, emails or direct mail publications.
Educational content could focus on convenience, security and innovation for younger, tech-savvy individuals aged 25-34. Our report found that 45% of this group is aware of Open Banking and is more likely to be open to payment innovations. Resources like short-form explainer videos on social media platforms can highlight its practical benefits, such as seamless digital payments and better money management.
For the older generations, particularly those over 55 with only 32% familiarity, the approach should be more focused on addressing their concerns. Clear step-by-step guides or on-pager FAQs that provide reassurances on regulatory safeguards can be vital in increasing the adoption among this demographic, instilling a sense of security and confidence in their financial decisions.
Joint, collaborative educational initiatives between financial institutions and regulators and partnerships with consumer protection organisations could provide consistent educative information through co-hosted webinars and shared educational materials. By aligning efforts and selecting the proper communication methods, stakeholders can build awareness and trust across all age groups.
To build trust and increase Open Banking adoption among UK consumers, merchants’ educational efforts should emphasise its key advantages. Three essential benefits that can be at the forefront of consumer education initiatives are:
Enhanced security: Education efforts should focus on communicating the enhanced security features of Open Banking, explaining not only that it is secure but also how it can be safer than traditional payment methods. By using bank-level security protocols, Open Banking ensures that sensitive consumer information is never shared directly with third parties, reducing the risk of fraud or data breaches. Consumers authenticate transactions directly with their bank, meaning the payment is authenticated with one of the most secure methods available to date. By clearly illustrating this user journey and how these security mechanisms work, merchants can build greater trust with potential consumers, assuring them that Open Banking offers a safer, more secure experience.
Convenience and efficiency: According to our report, 34% of respondents prioritise efficiency and convenience in payment methods. Educational campaigns should highlight how Open Banking can reduce payment friction, save time and ensure higher conversion rates due to its streamlined user experience. By emphasising how Open Banking simplifies transactions, eliminates manual data entry and speeds up the purchase process, educational initiatives can effectively attract consumers seeking smoother and more efficient payment experiences.
Improved personal finance management: A significant advantage of Open Banking is its ability to provide real-time banking information, such as updating account balances instantly. This immediate access to up-to-date financial data is highly valued by 85% of respondents. Merchants should emphasise this benefit, illustrating how real-time updates enhance visibility over one's personal finances, helping users make informed decisions and manage their finances more effectively. This addresses consumers' demand for greater transparency and control over their finances.
While 66% of respondents had yet to receive any information about Open Banking from their bank, a multi-channel approach can be crucial to consumer education. Stakeholders in the sector can proactively use their existing communication channels (e.g. direct mailing, email newsletters, social media or in-app notifications) to educate consumers. This can be complemented by harnessing the power of word-of-mouth marketing. Customers who have experienced Open Banking could be leveraged to promote it, as 25% of respondents indicated positive experiences from friends and family would influence them.
In conclusion, building trust through education is paramount to accelerating Open Banking adoption in the UK. By addressing misconceptions, highlighting benefits and emphasising security measures, stakeholders can unlock the full potential of Open Banking. Hence, as consumers learn more, they're likely to embrace this innovative payment method.
The future of Open Banking in the UK is promising, but its success depends on a collective and collaborative effort to educate and build trust with consumers. By investing in education today, financial institutions and merchants can help foster a more informed, secure and innovative financial landscape for tomorrow.
Payment service providers (PSPs) play a crucial role in achieving this feat. By partnering with PSPs, merchants gain access to expert guidance, address security challenges and simplify embracing Open Banking innovation. Such partnerships help drive mutual benefits for merchants, enhancing customer experiences and trust.
Reach out to us to explore how Open Banking can help you unlock new opportunities and revenue in the digital economy.