Other parts of this series:
Data made global headlines in 2018 for all the wrong reasons. Many consumers now have a distorted understanding of data usage and risks. For insurers, banks, and capital markets firms, the solution is radical transparency.
The many data scandals of 2018 put cracks in the long-held assumption that consumers will happily share their data with organizations in exchange for a more personalized or improved experience. In a recent survey for IBM, 75 percent of respondents said they wouldn’t buy a new product or service, no matter how enticing, if they don’t trust the provider to protect their data. Even more surprisingly, 60 percent of respondents said that potential war was less worrying to them than cybersecurity.
These figures suggest that we’re witnessing a sea change in how consumers think about data. New regulations like the EU’s General Data Protection Regulation are also creating new legal requirements for data handling. The convergence of these two trends will have big implications for data-driven businesses like insurance, banking and capital markets. These developments demand big changes.
Make no mistake: these new data requirements and expectations will create hurdles for financial services organizations, whose appetite for all kinds of consumer data has, in some instances, only been whetted. The trick going forward will be to maintain the benefits of using consumer data to improve the customer experience and boost operational efficiencies while also radically increasing transparency and building trust with the public. The 2019 Fjord Trends report calls this challenge “data minimalism.”
Achieving data minimalism will be no small task for financial services organizations, but there is also abundant low-hanging fruit here. Many banks and insurers, for instance, request personal information multiple times—like asking a consumer to re-enter their mailing address when signing up for a new product.
This undermines consumer trust in responsible data handling in two ways. First, it gives the consumer cause to doubt the organization’s ability to manage data, just as you’d question the memory of an acquaintance who had to ask your name in every conversation over the course of years. Second, it reminds the customer that the organization is requesting the data in the first place. Eliminating practices like these is an easy first step for financial services organizations aiming for data minimalism and radical transparency.
In the bigger picture, open banking—making financial data more accessible and giving customers more financial transparency options—might offers a “magic bullet” solution to the problem. Now part of the regulatory mix in the EU, open banking has yet to arrive in North American markets with any real force. But it’s going to come here eventually, whether through consumer demand or regulation.
North American banks can get ahead of the curve by preparing today for the open banking future of the industry. Doing so could make them more resistant to disruption, help them land new customers, and make developing new products faster and cheaper.
It could also make it easier to forge ecosystem partnerships with likeminded organizations in complementary industries. A bank that has adopted open banking practices and achieved data minimalism might, for instance, partner with a travel business to present customized vacation offers to customers based on historical spending habits.
Of course, paying lip service to open banking is one thing. Actually achieving it is another. If you have questions about how to start your journey towards open banking, or if you’re curious about other implications of data minimalism in financial services organizations, I’d love to hear from you. I can be reached with the contact information at the top of this page.
In my next post, we’ll look at the “ahead of the curb” trend in the 2019 Fjord Trends report.