When a business´s creativity in engaging with the public backfires, it can have disastrous consequences. The recent furore over Revolut’s attempt to introduce mis-judged humour into financial services is a case in hand. Legions of those within its target demographic quickly took to social media to accuse the challenger bank of single-shaming through the implication that enjoying a meal in on your own on St Valentine´s Day was something to be lamented – “You ok, hun?” This was not the full extent of the outcry.
Young Money blogger Iona Bain’s description (“Crass, cringe, uncool and creepy”) highlights an equally important point. While people do not want to be talked down to by financial institutions, whether challengers or established players, they certainly do not want to feel that their personal data is in any way being compromised.
Many consumers are either not cognisant of the amount of data they produce in their daily life or are content not to think about it until it is brought rudely to their attention. In an increasingly digitised world, it is almost impossible not to provide valuable information to third parties, whether voluntarily or obliviously. Supermarket loyalty cards, social media platforms and search engines all create a priceless footprint of an individual´s behaviour that can be exploited to target advertising, pinpoint marketing or refine services to reflect customers’ preferences.
The financial services sector is no exception. Data is the oil in a bank’s engine and current accounts provide a rich source of customer information based on spending habits, direct debits and standing orders. However, many have yet to figure out how best to use data for their customers’ benefit or to monetise it for their own. Open Banking is beginning to prize open banks’ data vaults, removing the monopoly they previously enjoyed and the data that can be extracted from customers is as valuable as the revenue they introduce, if not more so.
The key to how banks can successfully approach the use of customer data is the creation of an exchange of value. When customers believe that a bank is making judgements or decisions for them based on the data it holds (buying a chicken biryani for one on St Valentine´s Day, for example) they tend to react badly. In contrast, where the application of this information can provide a tangible benefit through nudges, prompts or flags to save money, to earn more money or to avoid facing charges, the reaction is understandably far better. After all, supermarket customers have been happy for years to share their shopping habits if in return they receive offers on goods that were likely to buy anyway.
Open Banking was not designed to create a dystopian Big Brother world where our financial secrets are shared by unscrupulous banks. On the contrary, its guiding principle is to encourage product and service innovation to the consumer´s advantage. This may see banks helping their customers make informed decisions on which utility companies, media providers or telephony firms they engage with, as well as the financial products they choose where banks can identify an opportunity to make or save them money through data analysis.
The application of data can go further still. Continued advances in artificial intelligence mean that it is conceivable for banks to anticipate an individual´s financial needs at every key life stage: going to university; buying a house; a wedding; re-mortgaging; care arrangements for relatives and ultimately death. In the case of SMEs, those setting up a business or seeking finance to expand could be led by their bank to consider alternative sources of funding such as P2P finance rather than personal savings which is often the default option. For banks, this has a dual attraction. First, they can secure fresh sources of revenue through referral fees from their partners – and some banks are exploring business models where they will relinquish revenue if they can secure access to data or at least retain access to their own. And second, they can build a closer relationship with their customers in a world that is increasingly connected but has less physical interaction.
Of course, Revolut´s advertising campaign caused additional embarrassment when the bank was forced to admit that its figures were made up – it can see how monies are flowing but do not have the look-through to pinpoint exact purchases. This was a moot point for many who objected. They may have made the choice to embrace Open Banking and accept features that rely on their data, but they do not like being reminded of the depth and breadth of any intrusion into their lives, especially if it has the potential to reveal something embarrassing about their private lives. What some might label as “snowflake” behaviour could be millennials demonstrating the high value they place on their data particularly in a sector where past scandals and crises have created an environment of mistrust. Banks may now have greater incentive to use the data they have to build products that are centred on customer needs, but they nonetheless have a tightrope to walk when designing and marketing products that are reliant on the trade-off between privacy and data ownership and enhanced banking features.