I chaired a meeting of bankers last night, and we talked a lot about data and data leverage. One thing that bubbled up to the service over and over again was the threat of GAFA – Google, Apple, Facebook and Amazon (building upon last week's blog about same).
This also was raised at the conference I spoke at recently in Canada, with the speaker highlighting that Amazon are experts in tracking your preferences and leveraging your propensity to purchase. As he said: “I daren’t open emails from Amazon anymore as every time I do it costs me $20”, basically because he always buys something when he looks.
That’s the secret sauce of Amazon’s success.
The same is true of the others.
Your Google searches will bring back different ads and details to mine, because of our location and historical search preferences.
Your Facebook profile will serve different ads and links to mine, for the same reason.
And your iTunes will be different to mine too.
Everything is highly personalised for 1:1 marketing using your digital footprint, and this is because all of the GAFA companies understand data, data leverage, propensity modelling and customer insight.
That was the other question that came up.
And the feeling is that banks don’t need to be like the GAFA constituency because they are different: (a) it’s scary if banks start trying to leverage data intimacy and (b) bank data is different to social data.
On the first point, we had a lengthy debate about the ethics of banking and the use of bank data. Selling bank data to third parties is a no-no, or is it?
Barclays is to start selling information about 13 million customers' spending habits to other companies, and has admitted it could share the data with government departments and MPs.
In letters being sent to customers, it is also outlining what details about them it holds and uses which, it said, "may include images of you or recordings of your voice", as well as comments made in interactions with the bank on social media sites such as Twitter and Facebook. Barclays said it may collect "location data derived from any mobile device details you have given us" - suggesting it will be able to pinpoint where in the world a customer is at a particular moment in time.
However, the bank assured customers that any data it passed on to third-party companies would be aggregated to show trends, and that individuals would not be identifiable from it. A spokeswoman said there was "nothing sinister" going on, and added that it would not be profiteering from customers. Like most companies, Barclays has previously used customer data internally, but it has not shared it with third parties before. It is writing to current and savings account customers to let them know about the changes, which will take effect on 9 October.
A leaflet details the "new ways" in which Barclays' companies can use customer data, stating: "We can combine information about you with information about other Barclays customers to create reports which we may share with companies outside Barclays. This information is numerical and not personal, and you will never be identifiable on the basis of it." This could include data on how much people spend on different products and services.
The bank said the data could be passed to government departments and MPs – for example, to give them an insight into what was happening in their constituency.
In a statement the bank said: "We only use information in a numerical, anonymised and aggregated way, as is standard practice at many companies. It is not about providing information for sales or marketing use and does not include any personal data."
It said the move was in accordance with industry guidance from the Information Commissioner's Office and the law. "Customers are always able to opt out of marketing activity and their personal data will never be passed on to anybody else without their explicit consent," it added.
The bank said that data relating to where a mobile phone was at a particular time would be used for fraud prevention purposes, and only when a transaction was picked up by its fraud detection systems. It would confirm "at a country level" if the customer was in the region where the suspicious transaction had taken place. Customers will be able to opt out of this if they wish.
It’s a very fine line between a bank using data to provide better service versus crossing into being disturbing.
If a bank sends me a coupon saying we know you just filled your car with diesel at Shell, if you go to BP next time, you would save 5 pence per litre, is that good service or scary service?
I would personally claim it’s good, as long as I’ve opted in to that service.
So the scary part is not a real concern.
The other claims is that bank data is not the same as social data.
If a telco drops a call or a Google search freezes or Facebook failed to post your status update, you don’t care. It’s irritating but you just call, search or post again.
That’s not the same with a bank payment transaction.
Posting money is a mission critical fail safe process, not a trivial matter like searches, calls and updates.
Now that’s an interesting one, as the reason why GAFA get the most traction on the net is that they are more failsafe than anyone.
That is because they really get technology, and have all the failsafe mission critical systems to never fail.
We haven’t even mentioned PayPal, but the #1 thing about PayPal is that, as the de facto internet payment system, it’s targeted 1000 times more than banks for cyberattack.
And if they never fail, then these are the firms that we need to consider the most for when it comes to the next generation bank:
- PayPal and Google have invested over $1 billion in their mobile payments processing operations between 2009-12, amounting to more than the amount venture capitalists invested in all mobile financial start-ups during the same period;
- Facebook has a head of Financial Services to build their financial business, and has created strategic partnerships with PayPal, Stripe and Braintree;
- Amazon hired 650 people to improve their payments processing operations in 2013; and
- Apple has all the infrastructure to takeover payments from authentication (TouchID) to wallet (Passport).
It’s just a matter of time before someone creates a truly Digital Bank for the Digital Age, and it probably won't be a traditional bank.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...