European consumers face cold feet regarding all the financial innovations that are currently emerging. Of those innovations, Open Banking is one of the most pregnant examples. ING research shows that significant groups of people already see the benefits of innovations, but are reluctant to use them. They often still weigh the risks against the benefits. Convenience and trust are likely to be the biggest drivers in increased adoption of modern technology, according to ING.
"The world is moving so fast these days that the man who says it can't be done is generally interrupted by someone doing it." With this quote, ING introduces the results of the study. While also very applicable in the present day, the quote is over a hundred years old, coming from American writer and philosopher Elbert Hubbard. Of course, the rise of trains, cars and electricity represented a watershed with the period before it. But ultimately it is a matter of perspective whether the world of today is changing faster, than that of then.
The financial system is one of the drivers behind the rapid technological change the world is currently experiencing. Saliently, it is also simultaneously a threat to players in that same financial system. Looking at how quickly people go along with change, ING concludes that people often turn to what works and what provides convenience. People look at how new tools work versus existing ones. Network effects then have a major influence on the rate of adoption. Finally, social acceptance is a third important driver.
Although people rightly express their concerns about loss of privacy, for example, and can actually barely explain what is going on in the background, they not infrequently still tend to use new applications because they are perceived as a godsend.
Greek scientist Spyros Kokolakis calls this phenomenon the "privacy paradox": in the digital age, privacy is a major concern for many people, but on the other hand, individuals give away personal data relatively easily in exchange for a small profit. The most concrete example of this is participating in a win for products that are actually available for next to nothing. Often under the motto, "Oh well, it's just my email address," not knowing what stipulations they are all agreeing to.
Against this background, the Open Banking ecosystem is an environment in which all kinds of companies frequently ask consumers to give up their personal data. However, it is constantly emphasized that they themselves must first give permission to do so. For example, for making payments, managing digital cash books or investing.
ING asked residents from 13 European countries a set of questions and some interesting conclusions emerge. Some 35% of respondents said they were aware of at least some of the possibilities offered by Open Banking. This "awareness" does not automatically correspond to an intention to use it. The opposite may even be the case, with people who are actually not aware of Open Banking at all making use of the services it offers.
ING also asked consumers to what extent they feel comfortable with the idea of sharing personal data with a financial service provider, followed by whether that would be a useful service. Very remarkably, Germans and Austrians feel very comfortable with this. This is striking because privacy is a very delicate issue in Germany and Austria. Possibly a high level of trust in banks and institutions is the reason for this high score.
On the other hand, the difference in Germany and Austria between the willingness to share personal data and the likelihood of using the service is enormous. In most countries, it is just the opposite. There, the willingness to share personal data is quite low, but they do see the usefulness of new applications.
Residents of the United Kingdom are the most likely to do something with Open Banking. At the beginning of the year, the one million user mark was rounded. That number was double that of six months earlier, while little has changed in the percetage of Britons who feel comfortable sharing data.
Familiarity and choice may play a big role in this. The United Kingdom is home to as many as 178 companies licensed to operate under Open Banking or PSD2. Number two Germany has only 36, more than France, Italy and Spain combined. That illustrates the gap quite nicely, although it must be said that the UK is simply a lot further along the development path of modern financial technology.
To demonstrate the discrepancy between the adoption of modern technology on the one hand and having concerns about its security on the other, ING comes up with another question about security methods.
Almost everyone has a smartphone these days, many of which can be unlocked using fingerprint or facial recognition. Yet trust among many Europeans is not particularly high in any of the possible methods. There is a huge gap between smartphone adoption and trust in the devices.
In the end, everything will come down to convenience and trust. When something - like the smartphone - carries so many supposed benefits, people are evidently inclined to hold water when it comes to concerns about security or privacy.
The benefits of Open Banking, such as managing personal finances or managing accounts at different banks from a single interface, are relatively easy to discover. Trust, however, is a bit more complicated and is related to citizens' attitudes toward institutions and how companies shape access to personal data. Investing in security and trust is something that often doesn't pay off in the short term, but does in the long term. Experiencing convenience and a sense of trust together have the potential to overcome any concerns around Open Banking. Until something new comes along.
