BUSINESS

Where to now for financial marketers?

by Peter Matthews of https://www.nucleus.co.uk

It looks like Google and Facebook’s data-by-stealth model is in the spotlight.  GDPR has exposed the once highly profitable personal data collection practices which have underpinned Big Tech’s business model for years.

Whilst there is no getting away from the fact that we live in a data economy, GDPR has marked out some boundaries that, until now, have been poorly defined and hardly ever policed.

Where behavioural data was once considered to be the oil of the Data Economy, consumers are now more aware of the fact that it has frequently been exploited.

Financial organisations are no strangers to regulations, and adhering to these has always required the collection of large amounts of customer data. This is then collated and used for various activities from customer on-boarding, relationship management through to trade-booking, and accounting.

Whilst this data offers banks a bird’s eye view of their customers’ financial habits it has not resulted in their improving users’ experiences or their own decision making.

If banks truly want to meet their customers’ expectations and respond to their Fintech challengers, they are going to have to shift their approach to personalisation and build a new engagement model, based on transparency and trust. Handled properly this could usher in a new era for financial brands to enhance engagement and loyalty.

As it stands GDPR is not the only data challenge. Embracing the competitive opportunities and threats of Open Banking (PSD2) is also on this year’s agenda, as is understanding where the two complement or clash. On the face of it, Open Banking brings consumers advantages in promoting competition between financial services providers, working to the benefit of many Fintechs and, in theory, providing customers with more control over their financial data.

But in practice, what percentage of consumers really want to allow Fintechs access to their bank and credit card accounts, so an app can tell them how much they are spending on coffee? That’s not much of a value exchange for sharing very personal data.

The Open Banking dilemma

From cookies in browsers to mapping social media behaviour, trawling personal contacts, tracking where you go and even what you say, Big Tech has turned consumers into products whose profiles they sell to advertisers. Now, with Open Banking, if your personal finance profile were to fall into the hands of Big Tech, your financial data profile could be combined with your social media profile, plus everything else Big Tech knows about you.

Open Banking is a regulated activity but facilitates personal financial data to be aggregated to create a 360-degree customer view, which regulated financial brands can use to profile and score individual consumers.

YouGov 2018 research indicates that 72% of UK adults hadn’t even heard of Open Banking and 77% say they would be concerned with sharing financial data with anyone other than their main bank. In a post-GDPR environment, the very idea of sharing personal financial data with multiple financial brands would seem invasive to many, especially to older demographic groups.

The productising of consumers

We are beginning to see how GDPR – which includes ‘the right to know’ what personal data is held by any company operating in the EU and ‘the right to be forgotten’ – will curtail the productising of consumers by Big Tech, at least without specific consent. But will the same principles apply to Open Banking? Or will customer’s financial data become available for authorised and unauthorised actors to exploit – and cyber criminals to hack into?

Interesting future developments include Big Tech companies entering financial services (think Google Pay, Apple Pay and Apple’s recently announced credit card) to combine all this financial data with what they already hold, while others may take the side of the consumer.

A new value adding strategy

In February Apple sent out a strong message when it blocked Facebook from running internal iOS apps. The restrictions came after Facebook was found tracking teenagers’ iPhone usage data. Tim Cook, Apple’s CEO, has also called for new digital privacy laws in the United States (not unlike GDPR), warning that the vast scale of personal data processing is harming society.

Most recently, at the launch of Apple TV+ Tim Cook hinted at ‘baking-in security to Apple’s entire eco-system’. Could Apple be building a new business model based on privacy and consent to contrast with Facebook and Google? Could banks follow suit and rebuild their value propositions based on core values of trust and consent and a more nuanced understanding of the customer?

Leveraging data – ethically

When it comes to effective data management and valued customer benefits there is a gulf emerging between Fintech neobanks and their more traditional counterparts. Fintechs and challenger banks have spotted the opportunity to use streamlined digital platforms to leverage data to segment the market in quite meaningful ways and are hungry to exploit Open Banking. In fact, many have business models predicated on this.

Big heritage banks, on the other hand, are still struggling to use their data in ways that offer users clear advantages. Unsurprisingly they are more reticent to embrace Open Banking, especially sharing their customers’ current accounts with third parties, whose aim is to siphon-off profitable services, leaving the regulated banks with most of the compliance and cost.

The value of consumer trust

GDPR and Open Banking present the chance for financial marketers to re-engage with customers and educate them around the benefits of safe data sharing. Ultimately harnessing personal data should improve the customer experience but it must reward them with a share in its value.

Showing that there are secure data governance strategies in place can go a long way towards fostering consumer trust and helping to build strong brand relationships. As a consequence, finance marketers must strive to allay any fears individuals may have around how their data is gathered and used. And build this into their brand DNA.

The competitive advantage of privacy

Getting privacy right should be viewed as a competitive advantage. We are all more likely to trust a service provider who values our privacy (beyond mere legal compliance) and is transparent about how our data is used. And trust still equals loyalty.

With so much personal data already held by big financial brands, and regulators beginning to flex their muscles when consent is taken for granted, marketers need to balance the golden allure of big data with its risks, and recognise that consumers still value privacy.

Only when they do will we see personalisation valued by brands and by customers.

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