We rely less and less on the paper and metal of physical money in this age of contactless payments and online transfers — which makes our banks more important than ever.
We need our banks to be available 24/7, offering dependable services wherever we are, from the ATM on the High Street to our online accounts to the app on our smartphone. But when it comes down to it, most of those services still boil down to saving, borrowing, moving and spending money. If our current account is with a different company to our mortgage provider, those services are split between two firms who probably don’t talk to each other very much. A personal loan, car finance, investments and savings — if we shop around for these we suddenly have a suite of providers with a whole load of admin that comes with each.
And yet who we are and much of what we tell these companies about us is — or certainly should be — the same, i.e. a truthful account of our circumstances. We are the constant, going to each of them when they largely want the same information from us. Wouldn’t life be easier for everyone if it was the other way round?
Not only would this make things better for us, the consumers, but it also opens up all sorts of opportunities for banks to play a more valuable role in our lives, with new products and services that give us new levels of control over our money and what we do with it.
In order for them to do that, they need to get their hands on not only our money but also that other prized currency — our personal data.
The personal data economy is moving beyond the old model of companies gathering our data and exchanging it between themselves for their gain rather than ours. The smart money is on building new, deeper relationships with consumers by handing us back control over our personal information and allowing us to share it on our terms and with something in return.
This is the Internet of Me, where we are all at the centre of our online lives, with experiences and services made personal to us. But its full potential to transform our lives and the way companies to business with us relies on us sharing greater amounts of our personal data. And that will only happen if we are convinced those companies are truly acting in our interests and offering us something of value in exchange.
On the money
Banks are perfectly placed to lead the way here. Almost every adult in the UK has at least one bank account and, according to the Office of National Statistics more than half use online banking. And, of course, banks hold a lot of our most important data. Quite simply, they are a major part of our lives already, so by giving us greater control over our financial data and helping us do more with it they can position themselves as key enablers of the Internet of Me.
Happily, it’s what many of their customers already want. More than 90% of consumers would like more control over their data according to studies by both the Direct Marketing Association (DMA) and Digital Catapult. The latter found a third of those polled would also like services that give them that greater control plus the ability to choose who they share their data with. And, unsurprisingly, most research into consumer attitudes shows that the more sensitive the data, the greater the reward or benefit should be.
One thing is certain, consumers increasingly understand the value and power of their personal data. Consequently, there are issues about who has it and how it is used. We know companies harvest our information, track our online activity and trade off our data and, ultimately, profit from it. The companies that do so sneakily or without being transparent damage trust in themselves and to some extent the wider personal data economy.
The flipside to this is that companies that do this well establish valuable trust with consumers. Trust was the most important issue when deciding to share data with a company for 40% of people polled in the DMA’s survey – four times more than any other factor.
Trust is in the bank
Again, banks have a huge head start here. People trust them with their data more than almost every other sector. In both the DMA and Digital Catapult reports they ranked second after doctors and the NHS. In one poll last year, for Unysis, banks even trumped the health service. Not bad, given the amount of negative press banks have had in recent years, from taking the blame for the financial crisis to the Libor rate-rigging scandal and criticism over huge salaries and bonuses. It is clear that at the consumer level, banks have been doing the right thing.
Fundamental to trusting organisations is the degree to which they can ensure safety and privacy with our personal information. That is never more so than with very sensitive and important data such as medical or financial information. So it’s encouraging that our banks — and medics — are doing a decent job on that front.
However, none of that is to say banks do not face the same considerable challenges in exploiting the huge potential for innovation and growth that any other sector or organisation faces. Indeed, those enviable trust ratings should not be taken for granted. The number of data breaches by financial firms has soared by 183% since 2013, according to the results of a recent Freedom of Information request to the Information Commissioner’s Office (ICO) by software company Egress. The British Bankers Association was swift to hit back, pointing out that the 791 cases — mostly instances of human error — should be seen in the context of the millions of online banking customers and an industry that itself routinely reports breaches to the ICO.
Nevertheless, more and more data — and more parties having access to it — means greater vigilance and effort are needed to ensure security and privacy issues don’t undermine that hard-earned trust.
What’s in it for me?
So what will the Internet of Me look like for banking? For a start, there would be the opportunity to let consumers see their financial data from across a wide range of sources in one place. Improved personal financial management tools would allow greater control over payments, bills, income and outgoings, and other financial products such as pensions, investments and savings.
Visibility of fees, charges and interest across accounts would help consumers make better choices and manage their money better. New products and services will be born. For example, new financial advisory and planning services would have access to complete, accurate and up-to-date information. These could be made available to a wider market than that catered for by Independent Financial Advisers, whose fees can be a barrier.
Signing up for new services or switching accounts would become much simpler and quicker, with much of the onerous manual form-filling done away with. No more digging out information from many scattered online sources — or from piles of household paperwork. And it would be real data, not user guesstimates.
Such innovations would require bank data to be shared much more freely. This is not a challenge to their dominance in the market. Rather than take a proprietorial stance, banks should see sharing as a mutually beneficial opportunity. By allowing third parties to enter the market and by working with partners to extend their range of services, banks can make their offers to customers deeper and wider.
Competition is a winner
More competition in the marketplace can only ever be a good thing, both for consumers and for the industry to remain agile and inventive. That is certainly the position of the UK Government which has put data at the heart of economic plans to improve competition in the banking sector, and commissioned the Open Data Institute to lead a study into how allowing consumers to share their financial data could drive innovation.
Its report highlights better customer experiences that improve engagement with financial services, enhanced security and fraud prevention, cost savings and opportunities for third party innovation as key benefits. Gavin Starks, CEO at the Open Data Institute said: “Open standards and open data will help reduce friction in the economy, and enable the UK to trade effectively in the digital economy. For consumers and businesses this will help improve their interaction with services, and enable new services to emerge that help them manage their finances. For banks and FinTech innovators I believe there are substantial opportunities for both efficiencies and innovation.”
The walls between sectors are already coming down, thanks to technology. “Industry boundaries will blur as platforms reshape into interconnected ecosystems” — that was the verdict of 81% of the executives, entrepreneurs and other experts interviewed by Accenture for its Technology Vision 2015 report.
The Citizens Advice Bureau came to the same conclusion in its Personal Data Empowerment paper, stating: “We can expect to see the data explosion blurring old industry boundaries. For example, many now believe the future of payment systems lies with the mobile wallet, which points to some sort of convergence between the banking and telecommunications industries.”
Rather than diluting their presence in this widening market, there is the opportunity for banks to strengthen their positions within it. Of course, competition means customers may choose to switch to a competitor, but it is also vital for a healthy financial sector. The banks that get their value propositions right and put their customers at the centre of better, more personal experiences will be able to build on already established foundations of trust.