The increasing popularity of digital transactions has drawn attention to open banking, a system enabling financial entities to share data with third-party providers. While the potential for greater competition and consumer options is evident, concerns persist regarding its branding and adoption. A recent report by UK fintech company GoCardless and consultancy firm 11:FS addresses these concerns, suggesting that the term “open banking” may not resonate well with the general public.
Criticism surrounding open banking’s terminological clarity is not new. Industry experts have long debated the need for a rebranding to demystify its purpose for consumers. The report highlights ongoing efforts by fintech firms to foster understanding and acceptance, yet the progress remains sluggish. Open banking users surpassed 10 million recently, yet widespread adoption has stalled, hindered by infrastructural and experiential challenges. These issues underscore the necessity of standardizing open banking practices to enhance user confidence.
What Are the Current Perceptions of Open Banking?
The report reveals that open banking’s perceived benefits are recognized by nearly half of surveyed businesses, who note faster payments as a primary advantage. However, familiarity with the technology remains limited, with only 23% of UK businesses expressing a strong understanding of open banking. Benjamin Ensor of 11:FS remarked on the need for a unified naming convention, suggesting alternatives like “pay-by-bank payments” to clarify the concept to the public.
Is the Industry Ready for Open Banking’s Expansion?
Despite increased interest among sectors with significant card payment costs, like credit and lending, open banking has yet to penetrate industries rooted in face-to-face transactions. Retail and hospitality sectors, for instance, are unlikely to adopt open banking before 2027. Paul Stoddart of GoCardless acknowledged the industry’s slow start but noted heightened interest from businesses investing in “open banking readiness.”
Emerging sectors such as construction, media, and consumer goods are predicted to integrate open banking next, driven by the desire for cost efficiency and reduced payment fraud. The report emphasizes that despite the slow uptake, these sectors present a promising opportunity for growth. As more firms realize the advantages, open banking could evolve into a standard practice.
Overcoming infrastructural gaps and enhancing user experience are pivotal for open banking’s future. The report asserts that collaboration with regulators and industry players is vital to expedite the adoption process. The journey towards mainstream acceptance is ongoing, with the promise of streamlined payments and improved transaction visibility leading the charge.
Continuous efforts to align open banking’s branding with its benefits are crucial for its success. While current adoption rates may be modest, the potential for integration across various industries suggests a gradual shift towards acceptance.
