Does open banking have a messaging problem?

Issues with stricter authentication and a raft of mixed messages have been blamed for holding back the open banking revolution, so what can be done?

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The big banks need to make open banking more user friendly and agree on customer messaging if the project is to prove successful, according to the head of customer experience at Barclaycard, Elizabeth Hartley.

Speaking at the Open Banking Summit as part of Finovate Europe earlier this month, Hartley talked about how the European Second Payments Services Directive (PSD2) gives banks the dual responsibility to open up their services via a set of open APIs while also making those services more secure, primarily through strong customer authentication.

The new regulations will require a lot more instances of multi-factor authentication when banking and transacting online, including for purchases over €30. Some banks will succeed in implementing simple biometric verification, such as using your thumb or face on an iPhone, but others may still rely on passwords or even physical card readers to authenticate transactions, which is a much higher friction experience.

"What all this is doing, I think, is creating a lot of noise and confusion in the market," Hartley said.

Messaging problem?

Opening up customer data while also keeping customers safe from growing levels of online fraud creates an inherent messaging problem for the industry, according to Hartley.

On the one hand open banking promises simple data sharing, giving customers access to better, more seamless digital banking experiences.

On the other hand the regulation is "telling you that online fraud is growing, that we need to add friction into your journey to keep you safe and secure".

"I worry that a lot of our customers at the end of the day will struggle to keep up and those non-natives and non-banking enthusiasts sat at home aren't getting what we are saying," she said.

This mixed messaging could create inertia in the market when it comes to adopting these new seamless open banking services, as fear of the risks threatens to outweigh the potential benefits for your average consumer.

In conclusion, Hartley asked: "Have we got the timing right, are we building white elephants people won't use and are our expectations realistic? If adoption doesn't come that quickly are we creating the conditions for a new oligopoly, are we going to see the breadth of fintechs today or some consolidation and cannibalisation?"

What next?

With all of these potential issues ahead, what can be done to avoid this 'oligopoly' outcome? Hartley believes industry-wide collaboration and a coordinated messaging campaign are needed to avoid the issues outlined above.

"For me collaboration on something like open banking is absolutely critical, when you are trying to transform a landscape you have to deliver your message as strongly as possible," she said.

The coordinated 2006 I Heart Pin campaign was highlighted as a successful example of this in financial services, marking a clean transition for customers to adopt chip and pin card transactions.

She asked: "Should we take this one big message approach to open banking to help our first customers get what this is, instead of the hundreds of competing messages it looks like we will be delivering?"

Hartley highlighted the customer experience guidelines from the Open Banking Implementation Entity (OBIE) as a "good start" when it comes to thinking about the open banking customer journey, but that the regulator should "be thinking more about what customers want" and "how they think".

"I think the regulator has an important part to play here, they are in the driving seat and have done a really good job thinking about the customer experience when drafting the rules," she added.

Response

This is obviously easier said than done, and getting the banks to agree on messaging ahead of the September PSD2 deadline seems far-fetched at best. That doesn't mean that some form of alignment isn't still possible however, especially in making clear how the new authentication and integration mechanisms will work, and the benefits that are available to your average customer.

Then there are those in the industry that believe open banking to be less of a marketing challenge than one of quality product development.

Nick Middleton, strategic payments director at Virgin Money added earlier during the summit that the finance industry should steer clear from even calling the initiatives 'open banking' because customers "don't know what the hell that means". "It is about making your product more compelling and competitive," he said.

Imran Gulamhuseinwala, trustee of the OBIE, agreed: "[while] it has always been clear that open banking is driven by world-leading technology standards, its success depends on how well it serves customers".

"The key, now, will be ensuring that everyone involved builds services that conform and perform reliably. That is why we chose to make the Customer Experience Guidelines an integral part of the standards rather than subsidiary guidelines.

"Open banking is an initiative with participation of, and collaboration with, over 2,000 stakeholders. It is important for the many actors within the open banking ecosystem to fully play their part. This is a once in a lifetime opportunity to truly make it easier for customers to move, manage and make more of their money - securely and with confidence."