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Data is the bank’s battleground – are you fit to fight?

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I’ve developed a whole new presentation on the ValueWeb, which I’ll share at some point soon, and tried it out today for the first time.  It was interesting to gauge the audience reaction, which was overwhelmingly positive.  We then had a panel discussion at the end of the session, and one of the panellists summarised my phases of the internet as follows: “the first three generations were all about nuts and bolts, and focused upon quantitative aspects of information, access and trade; the second two generations were then all qualitative, about feelings, emotions and relationships.”

Interesting.  Just as a reminder, here are the ten generations of the internet development that I listed last week (it’s non-exhaustive so if you can see more than this, feel free):

  1. Internet of access (TCP/IP, www, Netscape)
  2. Internet of information (Yahoo! AOL)
  3. Internet of commerce (Amazon, eBay, Taobao)
  4. Internet of content (blogging etc)
  5. Internet of relationships (social)
  6. Internet of value (or money if you prefer)
  7. Internet of things (wearables, TVs and cars on the net);
  8. Internet of sensing (machine-to-machine communications);
  9. Internet of robots and bots (when your carers and doctors are machines); and
  10. Internet of smell, taste and touch (as we have sight and sound only today).

I guess if phases 1-3 are quantitative and 4-5 is qualitative, then 6 is quantitative – digitising money and value – whilst 7-10 are all about immersive, augmented and ubiquitous.

 The challenge is that we have not yet got the data analytics in place to deal with phases 1-3, let alone 4 to 10.  By way of example one of the presenters put up a slide that said: “IDC estimate only 3% of global data is tagged and less than 0.5% is analysed”.  Wow!  And in a bank, they probably would apply those figures, e.g. less than 1% of their data is effectively analysed.  The reasons for this are clear, in that most banks have fragmented data due to their silo structures, historical growth through merger and acquisitions, and legacy systems that have cemented the fragmentation in place.

So I’ve talked often about the need for banks to change core systems.  Banks will have to do this if they are to be fit for the digital future and capable of analysing and leveraging their data.  However, in dialogue with many senior managers in these firms, they claim it won’t happen.  The reason it won’t happen is due to the leadership not having the guts.  In most firms, the average tenure of a bank CEO is less than five years and, when looking at core systems replacement, the risk is that it will fail and, even if it succeeds, they won’t be around to see it happen.  After all, a wholesale replacement of the back office engines is likely to take longer than these folks will be in position.

It’s an interesting take on the world of finance.  Meanwhile, if true, these banks will see themselves ascended by new players who can leverage data.  Put it simplistically.  In the olden days, we had banks that knew every customer.

To me this olden world is typified by James Stewart in the bank run scene from It’s a wonderful life.

James Stewart, as bank manager George Bailey, explains to his customers that withdrawing deposits will take the homes away from their neighbours which are funded by loans from those deposits. Good old days of banking, where George knows every customer by name but, more than this, he knows their lifestyle and financial position.  He knows when they need money and when they have money, and can advise them on what to do with it and whether they’re good for a loan or not.  That’s because George is part of the local community.

Now George needs to be part of the global networked community, and no human can deal with that ask, so the systems have to do it?  Right now, the systems can’t cope and too often the computer say no.

It only does this because the analytics aren’t good enough and soon clever banks will use all that data, supplemented by social data, to provide pinpoint accurate offers to their customer.  That’s because they have a single digital core of data that can be leveraged.  I just feel sorry for the banks that don’t have this, as they probably won’t be around for long.  After all, in the age of the internet, data is the battleground for the commercial wars of the wallet and, if you’re unable to fight or have weapons that are too weak (old systems), you’ll just get killed by the competition.

Postscript: thanks to Dan Bolland, former Global Head of Retail Analytics at Barclays Bank and now a Director with KPMG, for reminding me of these video clips


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Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, 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...

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