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Open Banking

The Rise of Open Banking: Opening Doors, Enabling Connections and Driving Consumer Adoption

According to Mastercard’s The Rise of Open Banking study, security, privacy, and trust are at the center of innovation. Open banking technology is paving the way for hundreds of millions of people to enter the digital economy. Three-quarters of U.S. consumers have already linked their bank accounts to automate financial tasks. They’re confidently adopting digital apps, products and services to make everyday financial tasks easier and quicker. Consumers are looking for more secure and simple ways to pay bills, send money to friends and open online accounts.

The study also revealed an accelerating demand for more complex needs, like financial forecasting, crypto investing and crowdfunding. This isn’t a surprise. Open banking is shifting and elevating what consumers can expect and demand from their financial apps and services. Payments are instant and automated. Adding financial data to boost credit scores is available. Buying and selling cryptocurrencies or stocks are immediate on many digital platforms. Banks, financial institutions and fintechs are connecting financial data securely and seamlessly to make these services a reality. 

Convenience is Paramount, and Open Banking Offers It

Time is our most precious resource. The consumers surveyed made that abundantly clear. Of all the respondents, 59% cited the time and work saved by speed and ease of use as the reason they’re adopting financial technology. Nine in 10 consumers in the U.S. utilize technology to manage their finances. 

The top use cases are financial task automation and peer-to-peer (P2P) payments. One of the major P2P platforms saw a 58% year-on-year increase in pure volume. Everyone loves being able to pay their friends quickly for dinner and drinks, or being able to send funds to a family member in need. These services continue to grow, quarter by quarter. 

Consumers are also happily automating payments for rent, bills, gym memberships and streaming service subscriptions. The average consumer in the U.S. is spending $273 per month on various subscriptions. For each consumer, this could mean initiating a multitude of relatively small payments on a monthly basis. If that’s done manually, it would needlessly soak up extra time and create tedious work. Open banking provides consumer-permissioned data to facilitate these real time payments simply and easily.

What the Future Holds

The survey also revealed a rising appetite for more complex needs like crypto investing and crowdfunding. As the adaptation of these tasks grows, this does not come as a surprise. In our hyperconnected world, consumers are used to tapping a few buttons on a screen to complete any task instantly. This expectation of immediacy has been groomed for years by other digital habits such as social media apps, email services and SMS text messaging. Until recently, those expectations haven’t moved into the financial arena, but now consumers are finding the same convenience in finances.

Alleviating pain points and privacy concerns for consumers would significantly boost adoption of open banking apps and services. Respondents wanted more control over their data. They want to own it, control it and benefit from it. They want financial institutions and payment networks to keep it secure. Twenty-nine percent of U.S. consumers and 28% of Canadians said they’d be willing to adopt digital financial apps and services if they knew what financial details are being shared, how often they were being shared, and if tools to revoke sharing access were offered. Mastercard’s data principles around consumer data ownership, control and security are aligned with these desires. They’re a key foundation to driving more consumer adoption of open banking.

With privacy and security being a leading concern for digital finances, control over data and protection from fraud is the way forward. Seventy-five percent of consumers actively try to protect their private data and 54% of U.S. consumers think additional authentication steps can help ease concerns when it comes to linking financial accounts.

The critical elements of the success and promise of open banking are access, control and trust. By turning more control of their financial data over to the consumer, they will reap more benefits. In turn, banks, financial institutions and fintechs will have greater opportunity to create new financial products and services for these consumers. 

Read the full Rise of Open Banking report here.