This overall score derived from sub-scores in three broad categories:
- Open banking: Posts mentioning ‘open banking’ explicitly or referring to PSD2. The net positive sentiment here was 18%.
- Sharing Financial Data: Posts that discuss sharing of financial/bank data with third parties. The net positive sentiment was 26%.
- Services: Posts that discuss apps, tools or services of the type enabled by open banking. The net positive sentiment was 16%.
Consumers were most positive about innovation – 27% of positive posts on open banking referenced innovation. And despite the many high-profile data breaches in the US, consumer’s control of data accounted for 18% of positive posts. That said, the biggest concern is still data protection, which accounted for 36% of all negative posts. Cybersecurity concerns accounted for another 13%. And, in a sign that there is still resistance to change, innovation was discussed in 16% of negative posts.
Overall, however, US consumers seem to feel positive about the pace of innovation and are growing more comfortable with sharing data. To build on this trend, banks will need to ensure they frame open banking as a way to make consumers life easier, their experiences more personalized, and their transactions more secure. Banks need to avoid debating about who owns the customer data, and how they plan to monetize customer data. These sorts of conversations only make consumers cautious, while the idea of convenience and improving their experience will continue to resonate and improve sentiment.
Innovation is strengthening US open banking
Among the four Index pillars, the US really stands apart when it comes to innovation, where it placed first. The country has a thriving FinTech industry: 141 FinTechs received venture capital funding rounds in the last three years; meanwhile, banks and FinTechs filed 128 patents in 2017. On both these metrics, the US led all the other nine markets surveyed.
Not only that, the intense competition in the industry is prompting regional banks to partner with FinTechs. They feel some urgency to do so given what’s occurring in the UK, where regulators are mandating the transition to open banking. Once global banks roll out those services in the UK, the theory goes, it’s only a matter of time before they extend open banking into the US. Regional banks hope to leverage their lack of legacy systems and relative agility compared to global banks to get a jump on open banking.
Ironically, while the UK’s regulatory approach may indirectly prompt more banks to partner with FinTechs and pursue open banking, the light touch of US regulators may allow players to develop an ecosystem that can react more precisely to customers and be more conducive to meeting needs. That said, one of their biggest challenges may be meeting customers’ high expectations. Products and services must continue to evolve and be relevant or consumers simply won’t adopt them.
Open banking’s future
Looking further into the future, the industry may evolve to a hub-and-spoke model, where the bank assumes the central role of managing the customer relationship, while third-parties provide the individual products and services – from mortgages, consumer loans, commercial loans to know-your-customer and Bank Secrecy Act compliance. Before that can occur, institutions must agree on standards for how they will transact and connect with each other.
