Trad Banks PSD2 Head Start Blog

Traditional Banks Have a Head Start in the Open Banking Space

The banks are in the media spotlight just now as open banking starts to roll out and the debate gathers steam. Are the banks ready? How are they faring in the brand new open banking space where everyone is jostling for room?

A Busy Space

There’s a lot of people at this party already. We’ve got the tech giants like Google, Microsoft and Apple, the social media superstars like Facebook and Twitter, Fintech favourites like PayPal and Amazonian-sized on-line retailers – well, like Amazon. And that’s not to mention the challenger banks, traditional retailers, telephone companies, utilities and aggregators.

The online operators are certainly in a strong position. They have already built their brands on powerful, innovative technology platforms and they’re all limbered up, used to moving with agility and operating on a global stage.

The Banks Are Ahead

However, according to a recent research project, Consumers’ initial reactions to the new services enabled by PSD2, it’s not the digital divas that are ahead of the game – it’s the traditional banks that actually have the head-start. For now.

The report, published by UK consulting firm Accenture, who carried out the research in partnership with the University of Dublin, was based on 800 face to face surveys in London and Dublin with consumers aged 18-64, all of whom had used online banking facilities in the previous 12 months.

The report looked at the different attitudes to open banking across the different age groups and the number of bank accounts held – all of which made for fascinating reading.

But I was particularly interested to see that, when surveyed about attitudes to Account Information Service Providers (AISPs) and Payment Initiation Service Providers (PISPs), consumers rank traditional banks as their first choice for the AISP role (65%) and also their first choice for the PISP role (76%).

The traditional banks have a substantial lead. And the report’s conclusion hammered that home, when it summed up that:

“traditional banks and online retailers have a great, initial starting point. It will now be up to them to capitalise on this head start by delivering products that provide a superior customer experience and security. The other players in the market have a lot of work to do, and must build up trust quickly if they are to compete effectively with the strong established players.”

It’s good news for the traditional banks. It seems their customers want to do business with them in the new world of open banking. They’ve known their banks for a long time and they trust them.

However, there’s no room for complacency as the research report also shows. The online retailers are snapping at their heels in second place. Amazon may be a giant, but its quite definitely not a sleeping giant.

The traditional banks have a head start but it’s only the forward thinking banks that will manage to retain their lead. Our Castlight team is currently working with some of UK banking’s smartest people as they innovate to stay ahead, many of them using our Affordability Passport and CaaS (Categorisation as a Service) technology to develop products which take advantage of open banking opportunities. These, quite simply, are the banks that are going to hold on to their percentage lead – and ultimately their customers.