How banks can capitalise on the data capture market

  • By Yun Zhi Lin

In an effort to increase “stickiness” and gain competitive advantage, forward thinking banks, such as the Commonwealth Bank are already tapping into their vast amounts of data.

These leading banks are now using artificial intelligence to generate a personalised experiences for their customers. 

Today, consumer data providers can gain deep insights by capturing valuable “metadata” that describes how their data is being used by downstream consumers. 

For example, insights into consumer data flowing in and out can give the banks early warnings for retention or opportunities to up-sell and cross-sell. 

Another example is that a bank could improve their own services, by learning the usage patterns from fintechs and other banks consuming their data. For example, banks could observe innovative applications such as PocketBook and look to produce more competitive in-house alternatives. 

This is a paradigm shift in that participating in the open data economy is a two-way exchange of benefits. 

Mostly notably a consumer data provider can at the same time be a consumer data receiver. Banks should also look to lessons learnt from government organisations such as Transport for NSW and its open data platform, which has enabled innovative third-party apps such as TripView, provide learnings for improving their own services, and attracted talents by showcasing interesting work opportunities.

The upper hand in data sharing

The banks definitely have an “upper hand” in terms of the amount of data they have. But the amount of data held doesn’t necessarily equate to trust. In the digital age, data protection is a right, not a privilege. And consumer trust is directly correlated to customer experience

In the aftermath of the royal commission, most banks have lost a great deal of credibility. While most fintechs would like to capitalise on this opportunity, they lack brand awareness to gain momentum. So effectively the open data economy could present a level playing field for all parties to compete on customer experience. 

What will be interesting to see are upcoming acquisitions and digital banks launched by traditional incumbent banks. A good example is Up, which is a subsidiary of Bendigo and Adelaide Bank. 

These “hybrid” entities effectively enjoy the best of both worlds--they are agile, while backed by the brand and economies of scale of the parent, yet suffer none of the drawbacks. 

The risk of an identify loss in an open data world 

The risk is quite real in not simply becoming platforms, but platforms under other layers of platforms like we’ve seen in the UK. 

Historically, Australian banks have become complacent, focusing only on sustaining innovation by iterating on existing products and taking more risks in disruptive innovation of new markets and territories. 

Open banking is the catalyst we need to kick start a race for innovation in the banking sector. Banks will face competition across two frontiers: B2B digital experience and B2C consumer experience. There are exciting times ahead and ultimately the winners will be the end consumers.

Yun Zhi Lin is the chief innovation officer at Contino. He works with firm’s banks and financial services clients to help drive both their external and internal innovation plans. He is a firm believer that innovation comes before transformation.