Banks might wake up to the need to leverage their data just in time to embrace an EU move that requires they share customer information with third parties. Ben Robinson, Temenos chief marketing and strategy officer, writes
The digital revolution has moved from existential threat to potential survival strategy for the world’s retail banks.
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The observation, revealed in our third annual study into retail banking Retail Banking; in tech we trust, suggests that banks have finally woken up to the opportunities that technology offers them when it comes to exploiting one of their biggest assets – customer data.
Some 25% of respondents said data management was the main focus of their digital investment, followed by cross selling capabilities, which are linked to using data well, and delivery capabilities.
What is interesting, though, is that while our study found banks more aware than ever of the opportunities to use this data, they showed no concern about the threat posed by the Payment Services Directive II, which opens up the prospect of them being forced to share this highly valuable customer data with competing third parties.
Fintechs have already shaken up the banking sector by seizing profitable areas such as forex, wealth management and payment services. They have been able to do so by leveraging data better than the banks and have taken advantage of new technology, digitisation and analytics to automate tasks many of the banks are still trying to do manually.
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By GlobalDataA saving grace for the banks has been the quality of the data they hold compared with the data collected to date by the fintechs. But once the fintechs can access the banks’ data thanks to PSDII and fully exploit it, I expect them to out-manoeuvre the banks in one fell swoop.
It continues to surprise me that the banks didn’t put up more of a fight against PSDII. If Google were being forced to share what has essentially made it the powerful company it is today – its contextual data such as cookies and meta data – to increase competition, Google’s lawyers would be getting rich on fees as the US giant tried to protect what it would see as part of its intellectual property.
Still, PSDII could prove to be a spur to banks to innovate and operate more like their fintech rivals. Countries within Europe have until January 2018 to incorporate the directive into their domestic legislation, giving the banks plenty of time to position themselves. Perhaps this is why data management has become more of a focus as they examine digitising their own core platforms. Or perhaps they just haven’t woken up to the threat, which is why it didn’t come up in our study. It does seem as if much of the sector is sleepwalking towards its implementation.
The more canny banks are digitising and some are even looking to partner a fintech solution provider. Deutsche Bank, for example, recently announced it was looking for new fintech start-ups to partner on a blockchain solution, rather than come up with one on its own. It is doing this despite the fact that it is part of the R3CEV consortium of banks that is developing a blockchain protocol for the whole sector.
Meanwhile, newer digital banks such as mBank and Alior Bank in Poland are teaming up with companies to white label projects or set up joint ventures. The Polish banks are working with Orange and T-Mobile respectively to target mobile phone customers. The banks manage the balance sheet and loans; the telcos bring the distribution and new customers, to whom the banks can cross sell.
These co-operation/partnering projects help banks in the war for talent. Competition from other industries for the best graduates was cited by 39% of banks in the study as a problem, and the fight for talent is hindered too by banking’s poor reputation, cited by 41%. Fintech might not be top of the graduate career list, but is probably higher than banking, and it is entrepreneurial.
While the quality and quantity of the banks’ data is a huge advantage it must be remembered that it isn’t their only advantage. They also are streets ahead of the fintechs when it comes to brand recognition and distribution channels. The fact that no fintech company has become a household name in spite of reams of comment devoted to their rise speaks volumes about how banks still have the edge.
Banks still have a very powerful proposition, with their data, brand recognition and distribution. PSDII should therefore be a call to action to get to grips with their data.
