The Future of Open Banking is Blurry for U.S. Consumers

Open banking is quickly becoming a “when,” not an “if,” for U.S. banks, as the Biden administration calls for improved consumer controls of personal financial data and banks accelerate their efforts to incorporate application program interfaces (APIs) into their services. But Americans’ lack of awareness of the concept, per recent Morning Consult international polling, paired with consumer fears over data privacy, could hinder open banking’s success stateside. 

Fifty-five percent of U.S. adults have never heard of open banking, placing America 10th in a list of 14 countries surveyed.

To be sure, ambivalence and unawareness make up the majority of sentiments about open banking globally, regardless of how advanced the systems are in each country or whether regulation or market served as the primary driver. 

With this in mind, U.S. financial services leaders should shift any efforts from raising awareness of the concept of open banking toward raising excitement about its potential benefits, while also allaying data privacy concerns expressed by a majority of U.S. adults. 

But most Americans aren’t buying the concepts behind open banking -- the promise of increased innovation, personalization and security of financial services products, all predicated upon bank and fintech use of APIs to create secure connections for the transfer of consumers’ financial transaction data. That said, neither are a lot of consumers around the world.

While a healthy share of American adults believe the financial services industry is due for an update -- 2 in 5 adults agree there is a lack of innovation in the industry -- the U.S. remains one of the least enthused markets for open banking. Overwhelming shares of adults in Latin American countries -- where open banking is also in more nascent stages -- want industry innovation. 

Open banking requires a level of data sharing that U.S. consumers might not be willing to provide just yet, although most international respondents polled feel a similar hesitancy with providing financial service companies such access.

Fear of bad actors is at the core of this resistance to sharing data -- for Americans as much as for consumers in other economies. A majority of consumers in every country surveyed except Japan believe that sharing data will lead to more fraud, with relatively few disagreeing.

As evidenced by other countries further along on their open banking journeys, strong awareness isn’t a prerequisite for success. As financial services leaders strategize internally on their open banking advancements, they will need to carefully make sure open banking innovations keep pace with consumers’ understanding of them, while focusing on also reassuring consumers of the safety of their data from fraud.