- Privacy-preserved data – where customers are in total control over their information – is a new asset class.
- To maximize this opportunity, banks need to build an ecosystem where customers can give banks permission to use relevant insights to provide them with custom offers and personalized service.
- This ecosystem helps banks stimulate customer lifetime value, loyalty, trust, and additional opportunities by making customer’s lives better with data.
Previously seen only as something for companies to mine and sell, privacy-preserved data is now poised to be the newest asset class that derives value for individual users. This seismic change to our business environment is already well underway, but banks have an opportunity to be at the center of this new asset class – and the ecosystem that will be built around it. Here’s how that system works and benefits banks, individuals, and third party brands.
Rethinking the potential of data
Data is more decentralized than ever, but the vast majority (84%) of customers want to control their data easily and nearly half (45%) want to use their data for customized rewards and benefits. Banks can solve the data decentralization problem with data vaults. Banks have been trading in trust for centuries, and remain one of the most trusted institutions in the world – despite people losing trust in nearly every other institution from government to the media. As a result, banks have an opportunity to extend from financial custodian to data custodian.
For this model to work, banks must think about data like an asset class. Just like holding someone’s financial assets, a bank should never touch or move a customer’s data assets without explicit consent from – and benefit deriving to – individual customers. That’s why data must be privacy-preserved, instead of seen as an offshoot that can be packaged and sold.
How banks and brands win when customers control all their data
When customers can derive personal benefit from their data, banks and third party brands win as well because of the lifetime value, increased trust, and increased business opportunities that stem from privacy-preserved data.
1 – Increased customer lifetime value and loyalty
Banks already think in terms of lifetime value, which is why you see offers of $500 bonus deposits (or similar) for opening a basic savings account. Banks know getting customers in the door today will pave the way to more business in the future.
This same mentality applies to data. Offering a data vault, banks provide a free and secure way for people to keep personal data safe from hacking – a key concern for the majority (71%) of people. From there, every time a customer grants permission for insights from their data to be used in exchange for benefit, they work through the banking app. The result is higher lifetime value, since the bank app is now the center of multiple transactions (not just depositing or withdrawing money). Further, any benefits a customer gets from a third party offer – such as a discount or exclusive offer – works through the bank’s app. This drives additional loyalty since being a bank customer has now made a person’s life better in ways not immediately connected to banking.
2 – Increased customer trust
People are deeply concerned about their data being used or sold without their consent. So while customers trust banks now, going down the route of packaging and selling data is a quick way to destroy trust. On the flip side, being known as the protector of a customer’s data in a decentralized world – the organization that helps them stay safe from other companies that would try to mine and sell their personal information – sets you up to build even more trust with customers.
When customers know their data is secure and can choose to use it for their benefit (or not use it at all), trust comes naturally. In an ecosystem built around data, banks win because they develop first-party relationships with customers and provide the opportunity to develop a first-party relationship with relevant brand partners in a way that benefits the individual customer.
3 – Increased business opportunities
When banks focus on providing opportunities for customers to use data for personal benefit, a world of business opportunities open up.
- First, a bank can use insights on a high level, such as tagging all customers living in an area that just had a massive snow storm.
- The bank negotiates an exclusive offer for its customers with an on-demand snow removal service which it communicates to its customers via the Banks app that live in the region impacted by the snowstorm. Targeting could even go deeper, for example only people with houses over a certain square footage and where the service would be most relevant.
- The bank never shares any data with the snow removal service, instead just communicates the offer to the targeted audience as agreed.
- Customers who receive the offer can then choose to use the on-demand snow removal service with their exclusive bank-brokered discount. However, they could also choose to ignore it, providing feedback to the bank that they already have a snow removal service. This insight then stays with the bank, which can use it to optimize offers in the future.
No money changes hands, yet incredible value is generated: the snow removal service got highly targeted marketing, the bank got to deliver an exclusive benefit to its customers, and customers get a personalized offer at the time when its most relevant – all using the power of insight.
Build a business ecosystem around data
Data-driven, value-generation ecosystems open a lot of opportunities for banks, third party brands, and individuals. However, it needs to be administered with the right governance approach to data. Namely, it must start with giving customers total control over holding, using, and sharing their data and insights. From there, banks must operate with a mentality of making customer lives better, using data as the means to get there. The desire is already there from customers, as is the trust in banks to be the central players. All that’s left now is for banks to acknowledge this new asset class and build infrastructure for customers to start using it.