Open and in control? A consumer perspective
Once a radical idea in the banking industry, open finance has now become commonplace. The benefits to consumers and financial institutions alike is clear with this data revolution offering people more control over their finances than ever. Innovation is also being fostered thanks to open finance giving customers access to a range of new products.
Yet, the advent of open banking has not been welcomed without criticism, with the benefits of open finance not being shared equally among the population. While the promise of open finance is significant, to most effectively realise its benefits, its risks have to be openly addressed.
A recent report published by The Finance Innovation Lab called ‘Open Finance and Vulnerability: A discussion paper’ highlights the issues facing some of the most vulnerable people when it comes to open finance. Millions of people in the UK do not have access to the internet and around nine million people do not have the skills needed to engage in a digital society, with these often vulnerable people being left behind in the open finance evolution.
There is no quick fix to this challenge but its essential that financial institutions work closely with regulators to ensure all people can access what are essential financial services through open finance.
Automation is making all types of banking processes more frictionless and quick for customers. Removing the human aspect from some systems and processes can be a benefit but for a number of vulnerable customers, the lack of person-to-person interaction can mean losing the ability to disclose their needs and vulnerability status.
The report also covers research that finds anxious customers who use self-service tech, like chat-bots, feel dissatisfied, even if the process helps them successfully with their question. Financial institutions must work hard to confirm that algorithmic decision-making does not further engrain inequities or exploit current vulnerabilities.
Despite the challenges that open finance can bring, when used correctly, it has the potential to offer effective support to vulnerable groups. For example, fintech firm Touco collaborated with the Money and Mental Health Policy Institute to build a open banking product for those with mental health conditions.
When unusual spending patterns are detected, the service sends a text message alert to both the customer and another person trusted by the account holder. This project resulted in lower feelings of shame for users and better financial health.
With more than 50% of UK adults being at risk of financial vulnerability, according to the Financial Conduct Authority, there are a massive amount of people who need products that meet their unique circumstances. All firms involved in the open finance movement need to ensure their innovative initiatives, programmes and products recognise the often diverse needs of vulnerable customers. Collaborations with charities and other purpose-driven organisations can support the goal of reaching a truly inclusive open finance ecosystem where no-one is left behind.
Join us on the Open Finance Stage at the Fintech Talents Festival to discuss and debate the opportunities and challenges Open Banking/Open Finance provides on the 15 & 16 November at the Brewery in London.
By Finbarr Toesland, Editorial Contributor, VC Innovations