Open banking and neobanks to continue their slow burn in 2020
Change continues to impact Australia's financial services as the open banking regime and neobanks move forward in 2020 but research shows awareness for both is lacking.
According to RFi research there is minimal consumer awareness of open banking and neobanks in Australia, with only a slow growth of understanding amongst consumers.
RFi Research shows neobanks are still ranks low in consumer understand sitting at 11 per cent,
Xinja has the highest awareness at 5 per cent, while Up, Volt and 86 400 all see awareness of 4 per cent.
“Interestingly, we did not see an increase in awareness of 86 400 in December 2019 despite their recent marketing activity although we should start to see awareness increasing throughout 2020,” RFi group research director Kate Wilson said.
Meanwhile, open banking in Australia could heed lessons from the UK. At the end of 2019 around 33 per cent of consumers in the UK were aware of open banking, compared to 23 per cent at the end of 2018.
“The proportion of consumers aware of open banking in Australia remains low and it is likely to be a while before this picks up, especially with the revised timeline,” said Wilson.
In December last year the Australian Competition and Consumer Commission (ACCC) delayed the roll out sighting additional implementation work and testing to be completed and pushed the introduction of the new legislation to July rather than the planned February deadline.
“Ultimately, however, it is likely that awareness of open banking legislation or the CDR will not be as important to shifting consumer behaviour as what new propositions emerge in the market.
“The proportion of consumers aware of open banking in Australia remains low and it is likely to be a while before this picks up, especially with the revised timeline,”
“From the UK we can see that awareness of open banking does lead to customers being more open to sharing their data to access new services – those who are aware of open banking legislation are significantly more likely than average to indicate that they would be interested in sharing their data in order to access new products and services," Wilson said.
According to Wilson open banking can expand its appeal and engage consumer by marketing benefits, this can also lead to consumers more willing to share personal data.
“If a proposition solves a real customer need or provides them with tangible value, especially if they already trust that provider, consumers are likely to open their data to that provider regardless of their understanding of the legislation.
“From the UK we can see that awareness of open banking does lead to customers being more open to sharing their data to access new services.
“Those who are aware of open banking legislation are significantly more likely than average to indicate that they would be interested in sharing their data in order to access new products and services.”
On the neobank front, Wilson added consumers are seeing what digital banks are offering but this isn’t necessarily translating into full customer switching.
“Given how new the neobanks are in Australia I would assume consumers are still in the process of trialling the neo-banks and would be using them in addition to their existing accounts."
Recently, Xinja announced that it had garnered $30 million in inflows in just the first seven days of opening its savings account. However, that may not necessarily mean that the bank can win on the main bank relationship front.
“In the UK we know that the neobanks are struggling to capture their customers’ main bank relationship, with just 1 per cent of consumers in the UK considering one of the neobanks to be their main bank despite a number of these providers now seeing significant customer numbers.”
Wanting to try these new propositions is also a key driver for around 1 in 3 neo-bank customers added Wilson.
“Across different brands. It will be interesting to see if any of the UK neobanks are able to solve this or if we will continue to see customers split banking across neo and traditional providers.
Wilson said a lot of this shifts seen in the market largely pre-date the Royal Commission, for example ING has been picking up a greater share of switchers over time at the expense of the Big 4.
“The Royal Commission did have an impact on trust in the majors, which we are now starting to see recover,” concluded Wilson.