Consumer data is so valuable these days that I wouldn’t be surprised if a commodities exchange opened up to support the buying and selling of this precious material. If in fact it was available for purchase on the open market, like gold, you would expect it be one of the few items to rise in value during times of economic uncertainty. Unlike gold however, it doesn’t need to sit still and be stored away in an underground vault. It can generate significant cash flow to whoever owns it and this is how banks need to start thinking about it. The monetisation of consumer data is the industry of the next decade and it will be interesting to see how quickly banks can step up to utilise what data they have.
At its very heart banking is an industry built around the secure transfer of financial data. Put simply banks rely on data for everything that they do (and don’t do). They use it to determine if you should be a customer in the first place, and then what type of customer you are. From there they use your data to work out what your credit card limit should be, and to even determine if they should process an international payment on your behalf. Whilst social media giants Google, Facebook, and Twitter might argue otherwise, if any company could piece together a complete breakdown of your movements and whereabouts, it would be your bank.
When the war for consumer data began a few years ago most people didn’t realise it. Now all manner of companies are playing a war on data and they are not afraid to say it. Importantly, along the way they have convinced consumers to become more transparent and part with what was once their most prized possession; privacy. The pace of change in consumer attitude and regulations around data has been nothing short of phenomenal. The pace of change in bank attitude has been a lot slower. Data quality, management and analytics have often been the poor relation to more customer facing investment over the years. I would challenge anyone to find an analytics manager at a bank who is happy with the infrastructure, support and resource they have to do their job. Often in major bank programmes and projects, robust and meaningful analytical capabilities is treated like a should have, not a must have. This mismanagement of data has surely been one of the biggest mistakes the banking industry has made in the last twenty years.
With most banks now investing in major enterprise wide data platforms at least half the job is done. The other half is what to do with all that data. One big opportunity for the banks is to start sharing the data they have, or even selling it. Maintaining an old school attitude, ‘that banks just don’t do that’ will only play into the hands of the competition. The introduction of new EU laws that require websites to inform and obtain consent for using cookies is going to have a significant impact on bank revenue streams. The vision of other companies like Google, Groupon, Amazon, and MasterCard make it quite clear that they are going to sell transaction history data to third parties to in turn make relevant offers and discounts. Using information about where you shop, what you have purchased and who you have transferred money too can
open up new and exciting revenue streams to the banking industry.
Regulators and consumers will initially be concerned if banks follow suit but in reality it isn’t that much different to what happens today. Card loyalty and reward schemes have been around for years with varying levels of success. Banks are also set up to support external marketing campaigns in much the same way as they would support an internal product promotion. A credit card product manager for example would provide specific criteria, targets and campaign material to a data expert to mine and then execute the online or direct mail campaign. In the future this product manager could be from Starbucks or Argos.
If anything, using data in a more meaningful way will actually lead to a better experience for customers. Instead of getting the same old offers for a bank product you have, or just don’t want, customers could start getting relevant third party offers. Wouldn’t it be great to get a discount car rental offer if you have just purchased a flight to Portugal? The data wouldn’t even need to leave the bank as the third party could approach the bank to target specific customers based on their transaction history or other explicit criteria.
Banks will need to be conscience about how far they take the opportunity and who they partner with. You are only as good as your weakest partner, so working with the wrong client could lead to unwanted risks or poor media exposure. Banks will then need to set clear guidelines about the frequency and relevancy of offers so that they don’t disenfranchise customers. On top of this a new operating model will need to be implemented to cover offer prioritisation, charging, and copy reviews. These are all decisions that need to be made, but one decision that should be clear, is that leaving this data sitting in the vault is no longer an option.