Sponsored: Insights into customer switching in open banking

Deloitte Open Data leader Paul Wiebusch shares the findings and insights from  Deloitte’s survey of more than 2000 retail bank customers.

The Farrell Review into open banking led with the headline and intent of giving customers choice, convenience and confidence.

The aim of Deloitte’s survey was to help organisations understand how customers are likely to react to the introduction of open banking. Our report looks at:

• The role trust plays when consumers look at alternative providers for their banking services;

• How trust influences people’s willingness to share information;

• Who switches their financial provider and what factors caused them to switch banks?; and

• What opportunities exist for banks to meet the shifting expectations of customers?

The banking sector is undergoing a transformation with changing consumer expectations, new competitors, technology enabling increased connectivity and regulatory change, including the Consumer Data Right (CDR).

Open Banking is likely to amplify and accelerate these changes.

From February next year (2020) the major banks will be required to respond to a customer’s request to share their account and transaction data with accredited data recipients.

New and existing competitors who are accredited as data recipients will be able to use this information to offer new products and services to customers and provide more value. As customers consider these new offerings they will have a decision as to whether they will switch or stick.

The survey’s Big Five findings

1. Trustworthiness is key: People do trust banks to keep their money safe (prudential trust), and to keep information about them and their financial transactions secure (information trust). But they don’t trust that banks have their best interests at heart (relationship trust).

2. Privacy – willingness to share: Organisations need to ensure information is secure throughout the open banking lifecycle, to provide customers with transparency over how data is used and shared based on express and informed consent, and clearly communicate the value created.

3. Engage – gathering information: Most people are satisfied with their current providers and do not actively seek information about other offerings. For those that do, most don’t end up switching. When data recipients are accredited, willingness to share data triples.

4. Switching – know your customers: About 20% of customers have changed the provider of at least one of their banking products in the last three years. Switchers are more likely to be better educated, have a higher income, be tech savvy and millennial (Gen Y)

5. It’s all about value: While better value is most important, many other product features and services also influence customers’ choices. All banks, incumbents and challengers, and also non- banks, need to see open banking as an opportunity to develop propositions that solve customers’ problems.

We asked people how much they trusted a range of organisations to keep their money safe and their information secure. Answers were provided on a scale which varied from ‘Don’t trust at all’ (1) to ‘Completely trust’ (7) where 4 is the midpoint (‘Neither trust nor distrust’).

Two things stand out. Firstly Australians are not very trusting. Less than half of those surveyed trusted or completely trusted any type of organisation to keep their money safe or their information secure, including any of the regulated and supervised entities.

So we looked at relative levels of trust. The chart looks at the average trust level for a range of organisations: ‘4’ is the midpoint, where people neither trust nor distrust an organisation.

Four groups stood out

1. Regulated entities - We trust most regulated financial institutions with our money and our information.

2. Potential Challengers - We somewhat trust airlines and supermarkets with our money and our information.

3. Indifferent - When it comes to our money and information about our money, in general we neither trust nor distrust foreign banks and mortgage brokers.

4. Distrust - We distrust technology companies and digital and neobanks with our money and information about our money.

The survey also highlighted that people generally bank with the type of type of organisation in which they have the highest levels of prudential and information trust: This was true for customers for major bank, regional banks, mutual banks, digital banks and foreign banks.

In addition to trusting banks with their money (prudential trust) and information about them and their transactions (information trust), people also want to trust that the organisation with which they bank with has their best interests at heart (relationship trust). However most banking consumers (64%) do not believe that their bank has their best interests at heart.
So how can organisations build trust, and trustworthiness?

The starting point is an ethical mindset. Consumers’ perceptions of a bank’s ethics—wanting to keep promises—was the number one driver in building trust and trustworthiness.

People want banks to provide the right products and services to help them achieve goals that are important to them. Banks need to support this with systems, processes and policies that enable them to deliver on the promises they make.

Banking consumers are not yet convinced that banks are getting this right. The ACCC noted that the future of the digital economy relies on trust, by both consumers and business users. The same can be said for open banking.

As Rod Sims from the ACCC has said: “If...you don’t have systems in place to check if you can deliver what you said you’d deliver, that is not a side issue. It’s a core issue.”

Paul Wiebusch has more than 30 years’ national and international experience in the financial services industry. He has led client service for a global banking client and held CFO roles for a retail banking division and a wholesale banking division of a major Australian bank. He currently leads Deloitte’s Open Data and Open Banking practice, bringing a thorough understanding of its impact on an organisation’s strategy and its customers, as well as the implications for technology, data, compliance and the ecosystem.

For more on Deloitte’s survey, Open Banking: Switch or Stick: Insights into customer switching behaviour and trust, download the report by clicking here.