In a backhanded way, Equifax may have done banks a big, fat favor. By demonstrating in the most painful way how damaging a lack of rigorous controls over personal data can be, Equifax reinforced the established banks as a relatively safe harbor in a data security and privacy storm.
Before the Equifax story broke, Accenture conducted a survey of 2,000 British bank customers with more than half of them saying (53%) that they would never change how they bank and take up more open services. The bad news for banks is, of course, that 47% are effectively saying that they WILL share their data with other financial institutions (and that percentage grows the younger the consumer).
So what does this mean for banks? It means that they have a window of opportunity to evolve their value propositions beyond current state. As discussed by Charlie Platt, and in my previous blog, there are very real threats posed by fintechs and big tech towards the banks. They are introducing capabilities that are chipping away at the traditional value propositions offered by the banks. And those capabilities tend to be highly personalized and data-driven.
Customers are willing to share their information when they receive something of value in return. For instance, by sharing my Fitbit data with my health insurance company, I get rewarded for healthy behaviour by collecting points I can redeem for a movie ticket. Or, by providing my full financial picture to my bank, I get access to personal financial planning tools and advice that allow me to more proactively make decisions and manage money. In the race against fintechs and big tech, the banks have the advantages of brand recognition, an established broad customer base and the vast quantities of data that this base generates every day.
Instead of the banks just ensuring that data is not shared with competitors or substitute competitors, they have to plan strategically to encourage their customers to share more data with them. They need to create ecosystems with partners – both financial and non-financial – that will contribute pieces of the new, personalized services to customers. They need to aggregate current metadata structures, and remove data inconsistencies to achieve a better and unified Customer 360.
They need to enhance analytical capabilities, and move from traditional business intelligence toward a fast consumable data layer for real-time customer data access with predictive modeling capabilities. And they need to structure existing data, and combine the data with additional external data sources, both structured and unstructured (like social media), to better assess customer needs. This will enable them to have to get to know their customers better, and understand their actions in real time. This will ultimately create the ability to engage customers on a personalized basis…just like Amazon, Netflix or Spotify. That’s the benchmark.
Digital transformation in banking is underway, but still in the early stages. Some banks are being driven by IT, some by marketing, and some by a vision from the C-Suite. But one thing is true regardless of impetus: Only a true platform approach, that enables an ecosystem of complementary capabilities, will enable a bank to become truly client-centric. And with the Equifax disaster, banks have a slightly larger window of opportunity to transform and continue to be that safe harbor for data that customers desire.