Open banking has a big branding problem, government’s public opinion research suggests
The data-driven concept of “open banking” is being hailed by some as a way to enhance competition in the financial-services industry, but public opinion research conducted for the federal government earlier this year suggests the idea may have a long way to go before it catches on with the population at large.
“None of the respondents have heard of or know anything about Open Banking,” said a report prepared by Pollara Strategic Insights for the Department of Finance, and recently released on a government website.
The report added that along with the lack of awareness, the term was “not met positively” by respondents.
“In fact, a majority do not like the phrase, with some actually having a visceral reaction to it,” the report said. “To these participants, Open Banking means it would be out in the open; their information, their data would be out for all to see and therefore access. Some specifically say they wanted their banking to be ‘closed’ (meaning private and protected).”
In reality, open banking is a framework that could allow consumers to share their financial data with third parties, which advocates say would allow for greater competition in the financial-services sector.
The research was conducted between Feb. 16 and Mar. 4, 2019, meaning it preceded some media coverage and a June report from a Senate of Canada committee that called on Ottawa to move ahead with adopting a framework.
There has also been low consumer awareness of open banking in the United Kingdom, a leader in the field.
While the Canadian study says its “qualitative nature” means results cannot be extended to a “broader audience,” the audience surveyed did not sound as if it were clamouring for open banking.
That lack of enthusiasm likely means the issue will not feature prominently in this fall’s election, something that could push back any potential implementation.
A Finance department official had already told a Senate committee in May that any necessary changes to legislation or regulations would likely fall to a new government.
The goal of the research, another finance official said Tuesday, was to give the government and its advisory committee a better understanding of the public’s expectations. More than 100 submissions were also received earlier this year for an open-banking consultation, “which were overwhelmingly in favour of open banking,” the official said in an email.
“The public opinion research and stakeholder submissions are now being examined in the context of the Advisory Committee’s study into the merits of open banking,” they added.
Pollara recruited 114 volunteers from across the country and income levels for 14 focus-group discussions that were either conducted online or in-person. According to the report, which was published on the Library and Archives Canada website, the value of the contract was $78,095.60.
Open banking was defined as something that generally “empowers consumers (including small businesses) to share their financial data with a broader range of financial service providers through secure online channels, in order to access new, innovative, consumer-centric financial services.”
They cannot, from this definition, understand either why this system would be warranted or how it would be different from what is already available
report, prepared by Pollara Strategic Insights for the Department of Finance
When given a definition of open banking before being provided any potential scenarios for its use, participants were confused.
“They cannot, from this definition, understand either why this system would be warranted or how it would be different from what is already available,” the report states.
Terms such as “Data Right” or “Financial Data Right” tested more positively, the study found, but two scenarios of how open banking could be used got mixed responses.
The reaction to the government adopting an open-banking system generally ranged from positive to neutral, with younger people tending to be more excited.
Other findings in the report included that many participants were dealing with multiple financial institutions, although most had one, or one they considered a “primary bank.” Few participants felt “unwavering loyalty to their bank,” and many said they shop around.
There were concerns about privacy and security of “non-financial” websites, the report noted, and about third-party providers. The research also found many participants unsure about who actually owned their financial information.
“While their bank holds this information, most assume if they asked for their information, it would be given to them, although it may take time and cost money in terms of fees.”
The results were to help with the decision of whether to adopt open banking in Canada, the report said. Ottawa announced in 2018 it would begin a review into the merits of the concept, which has moved to a second, implementation-focused phase that’s supposed to wrap up this year.
But whether anything is actually implemented remains to be seen.
Furthermore, a tender published in February seeking a background study on cybersecurity and open banking for the Department of Finance was scrapped. The Financial Post filed an access-to-information request for a copy of the study but was informed no records existed because the tender had been cancelled “on a non-prejudicial basis,” an official said Tuesday.
“The Department is now considering how it will proceed with examining the issue of cybersecurity in open banking,” they said.