💠 Data: The new black gold for banks (and especially fintechs)?
by Jonathan Herscovici, co-founder & CEO of WeSave, member of the management committee of France FinTech
$ 75 billion. In one week, Facebook's valuation suffered the biggest stock market drop in its history following the announcement on March 16 of the Cambridge Analytica scandal. The British company illegally used the personal data of more than 50 million users of the famous social network.
This story clearly shows to what extent data and its use have become ultra-strategic issues in the global economy both in terms of business model but also security and regulatory framework. In the banking and financial world, we are still in the infancy on all these aspects. Fortunately, fintechs are taking on the role of true market emulators.
The data banking gold rush
Thanks to the generalization of Internet technologies, adopted by banks and insurers at different scales (as revealed by an ACPR study published on March 20 - The digital revolution in the French banking sector), fintechs will be able to exploit extremely valuable data pools to nurture the exclusive relationship they want to maintain with end customers.
Current regulatory changes are contributing to these data-related upheavals, the PSD2 being the perfect example. This European directive, which has been (and still is) the subject of much discussion, will make it possible to offer end customers a service which can retrieve all the data available in its bank concerning each of its accounts. Very concretely, the banks will make APIs available - by September 2019 - which allow end customers (mainly through fintech) to have all their banking information. The main leitmotiv of these fintech disruptors is to take over the relationship with end customers, forcing banks to reinvent themselves. The starting point of this new banking era is undeniably data. Problem, the banks themselves do not know how to extract the data they have always had; involved, the technical debt accumulated over decades and the use - still too important - of obsolete technologies such as Cobol, created in 1959. While banks ardently criticize - for security reasons - the scraping technologies currently used by fintechs, they themselves resort to these methods to recover the data, to put it mildly.
Beyond the extraction of this data, the major stake lies in their exploitation, because it is obvious that the raw data is not sufficient on its own. Again, the banks don't seem to be doing it right. Thus, they will therefore have to call on fintechs to help them get there. Be careful, however, not to transform fintech into an “improved” IT services company which has both know-how, IT development expertise and a faster execution capacity thanks to its “lean startup” approach. Other fintech players, taking advantage of their agility in the use of data and their scientific and technological know-how, are competing with banks to bring more value to the end customer according to their needs. . Among the hundreds of possible applications of the use of data, it will first improve transparency with in particular the advent of intelligent comparators of the various players in the financial sector and of the financial products themselves. The client will, among other things, have access to the details of the costs and will be able to assess the objectivity of an advice: “Is the bank's economic model built on the sale of the product rather than on the advice it lavish me? ”. The customer will see for example - as further revealed by the AMF in its latest report on financial advisers - that retro-commissions represent more than 90% of the advisor's remuneration. It is moreover to avoid conflicts of interest between the advisor and the end customer that the regulator proposed the MiFID2 directive - whose implementation, which was to come into force on January 3, has been postponed for another three months - and encourages remuneration in the form of fees. This is a major upheaval for the banks which are still, for the majority of them, far from being fully prepared for it.
Towards much more “data-driven” economic models
The classic economic model of banks is losing momentum - reduced margin, new competition, regulatory pressure - all the more so as the frequentation of agencies has fallen sharply in recent years. As we have just seen, fintech threatens existing economic models by creating services that focus on better customer knowledge, a redesigned user journey and an objective match between customer expectations and the range of services / products designed for him. The fintechs are betting that knowing the customer better - thanks to the use of data - will necessarily lead to a meteoric increase in their satisfaction. The legitimacy of these new players to invoice a financial service will be even stronger. These findings are all opportunities to build new hybrid services, which combine the “human” support of a financial advisor and new technologies. If fintechs find the right balance between the two, through a single interface of financial products / services, to become the client's main point of contact as an “augmented financial advisor”, they will be able to relegate the bank to a simple role of designer of financial services. financial products, risk manager and fund custodian. A disaster for the banks.
Existing business models will not disappear that easily, however. They will first be optimized to the extreme by improving the efficiency of the entire banking value chain. The use of the data will obviously be the main contributor to this optimization. For example in the analysis of credit to companies, rather than going through a traditional analysis process, fintechs offer an automated analysis of the data of the bank accounts of these companies but also those generated by their business, such as the payment of suppliers. , or by their activity on social networks. This credit analysis is constantly updated because the feeds are updated daily - whether via the scraping method or the API. The granting of credit could be almost instantaneous. Banking data - already plethora of data - is therefore not the only usable data and can be crossed with other data as we have just seen. The web giants are the world champions in the use of all types of data, which is why they are increasingly interested in data produced by the financial industry. These analyzes of customer data (not only banking) are also starting to interest all merchants who, too, face a context that pushes them to innovate and better meet the personalization expectations of their consumers, whatever the channels used. Other fintechs are therefore rushing towards the business virtues of a “customer-centric” strategy that benefits everyone.
The banking experience of tomorrow will first and foremost be “customer centric”
As we have just seen, the financial industry will undergo major upheavals in the years to come. Competition in financial services will no longer be played out only on the price / product / brand triptych but more and more on data and its use, ultra-personalization for example. The players in the ecosystem - bank or fintech - who will stand out and who will generate longevity in their customer interaction are those who will be based on the values and emotions of the end customer. Customer-centric companies have understood that a product whose promise is based only on simple technical characteristics can easily be substituted: a car can be replaced by another car. If we were to quote Tesla, we would focus on its disruptive electric car technology but also on Elon Musk's vision of the customer experience in which he invests heavily. The creation of value is based on the amplified customer experience, through attention to detail, ranging from the acceleration power of Model S(unbelievable to have tested it) until interactive design of its stores.
What makes these strategies successful is the actor's ability to create a competitive advantage based on the customer experience which can even be empathetic at times: it is the ultra-personalization of the customer relationship. However, the importance of customer confidence in brand awareness and in the solidity of the company when making the purchase, and particularly in financial services, should not be overlooked.
This article is part of a series of posts published as part of the annual event organized by France Fintech: Fintech R: Evolution 2018, which will be held April 10 at Station F in Paris, on the theme “Data Liberation”. To share, comment and like on LinkedIn with the hashtag # FFT18.
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