The UK’s new open banking initiative may provide a £1bn boost to the economy, according to a new study from the Centre for Economics and Business Research (CEBR) and Trustpilot.
However, research from Accenture recently found 69 per cent of people may not consent to share their banking data with third-parties, demonstrating the entire industry must work hard to earn consumer trust.
Open Banking is the UK initiative to implement requirements of the EU’s Payment Services Directive II, which came into force in January. New Open Banking standards for APIs provide access to consumer and SME banking information for third-party companies benefiting consumers with personalised offers whilst fostering greater competition in the market. Customers must provide their explicit consent before their data can be made open to other organisations.
Cebr found that by improving information available to banks, Open Banking means institutions can charge customers interest rates that represent more accurate risk profiles, therefore reducing the ‘credit spread’ that exists today and freeing more money for productive use in the economy. Cebr found that every 1% reduction in the credit spread on mortgages leads to a £153m increase in GDP, with Open Banking assumed to result in a 7% reduction in today’s credit spread totalling £1.069bn in additional GDP.
Trustpilot SVP Glenn Manoff commented: “By giving customers the choice to provide their financial data to third parties, Open Banking is set to unleash significant innovation across UK financial services. The new standards will also increase competition and remove information barriers as a plethora of new fintech players access the data necessary to provide compelling new services.”
He continued: “However, as research from Accenture demonstrates the industry will need to work extremely hard for the £1bn annual GDP benefit to be fully realised by demonstrating that consumers can trust them with their banking data.”
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