DATA PORTABILITY: TRANSFORMING THE FINANCIAL SERVICES INDUSTRY

Nathan Snyder, Partner, Brickendon

We live in a world of data and regulations, so it is not surprising that the two are having a large impact on each other and have fundamentally changed, and will continue to change, the financial services landscape.

Imagine a day in the not so distant future, when you are on the train on your way to work, you check a dashboard produced by an app on your phone that shows your spending patterns aggregated from all your bank accounts. It identifies that you are spending too much on entertainment and are falling short of your savings goal.

Fast-forward a couple of hours, and on your commute home from work you learn from a social media alert that a bank has a much higher interest rate on savings accounts than your current bank. You therefore use your mobile phone to go online and transfer your details and money in a matter of minutes to take advantage of the better deal.

This is data portability at its best. But how will it impact the financial services sector and how can we take advantage of this?

The changing faces of data portability

In the banking world, data portability is a concept that completely changes its appeal in accordance with which hat you are wearing.

From a client perspective, it opens a brave new world of services that don’t yet exist and the opportunity to easily and seamlessly switch to a service provider with the most attractive offer.

For FinTech companies, agile and innovative by definition, but still operating in the shadow of large corporate financial services organisations, it offers a window of opportunity to gain access to an enormous pool of historic data to which they can apply specific algorithms, giving insight into individual customers and services and ultimately enabling them to provide a more competitive service.

By contrast, for large financial services corporations, data portability is a can of worms that goes against everything the industry stands for: client data security before everything, Chinese walls and complete isolation of data from the outside world.

Impact of regulation

These contradictions are the result of a host of ambiguities regarding what exactly data portability is, how it is supposed to be implemented, and the ultimate issue of what is client data and who owns it? Such questions are rapidly moving from the philosophical realm into the real world as the newest data protection legislation, the EU General Data Protection Regulation (GDPR), is due to come into force in May 2018. GDPR clearly defines client data as data that helps directly or indirectly identify a client and swings the debate of ownership in a client’s favour. GDPR also mentions data portability as an individual’s right, but falls short of indicating exactly what it is and how it should be implemented.

Staying competitive

Improved access to data will stimulate competition in the banking sector. Reports commissioned by HM Treasury and the Financial Conduct Authority (FCA) have been unanimous in saying that competition in the banking industry is severely hindered by the difficulties consumers experience in taking advantage of the offers of competitors. Data portability offers a solution to this issue, giving consumers the choice over who has access to their data.

Innovation is crucial

The question also arises as to what big banks and other organisations that sit on mountains of valuable client data need to do to prevent it from being snatched and used by competitors.

At Brickendon, our experience of working with a diverse range of clients over the years has shown us that innovation is the key to staying ahead of the curve. The situation is the same for the adoption of data portability – embrace it early and become the preferred destination when clients start hopping from one bank to another.

Organisations should be innovative in the way they mine data and come up with new services to offer to clients. They should become agile to the extent that they can quickly replicate and adopt appropriate innovations brought to the market by their competitors and should review their data models, untangle data infrastructure and update the governance policies to clearly separate client data from proprietary data owned by the bank.

The goal should be to make it as easy as possible for clients to choose who they bank with, but ensure they are not bound for life by that choice. This a very important aspect of the customer experience which will allow new and former clients to join (or re-join) the bank and be integrated easily into their system.

Back to the future

Bill Gates was quoted as saying: “banking is necessary, banks are not…” and there may have been more truth to his comments than anticipated.

The complexity of the road ahead is in effect a call to arms before the data portability issue officially hits the banking market with a tremendous surge of disruptive power. The role banks play in the future of banking remains ambiguous and to some extent in their own hands.

Going forward banks will need to employ top talent in areas such as regulation, data science, and agile transformation. It will ultimately be an exercise of working side-by- side with the client to produce a uniquely tailored approach to make the bank a top performer in an exciting, but ruthless and ever more competitive industry.

Nathan Snyder, Partner, Brickendon

We live in a world of data and regulations, so it is not surprising that the two are having a large impact on each other and have fundamentally changed, and will continue to change, the financial services landscape.

Imagine a day in the not so distant future, when you are on the train on your way to work, you check a dashboard produced by an app on your phone that shows your spending patterns aggregated from all your bank accounts. It identifies that you are spending too much on entertainment and are falling short of your savings goal.

Fast-forward a couple of hours, and on your commute home from work you learn from a social media alert that a bank has a much higher interest rate on savings accounts than your current bank. You therefore use your mobile phone to go online and transfer your details and money in a matter of minutes to take advantage of the better deal.

This is data portability at its best. But how will it impact the financial services sector and how can we take advantage of this?

The changing faces of data portability

In the banking world, data portability is a concept that completely changes its appeal in accordance with which hat you are wearing.

From a client perspective, it opens a brave new world of services that don’t yet exist and the opportunity to easily and seamlessly switch to a service provider with the most attractive offer.

For FinTech companies, agile and innovative by definition, but still operating in the shadow of large corporate financial services organisations, it offers a window of opportunity to gain access to an enormous pool of historic data to which they can apply specific algorithms, giving insight into individual customers and services and ultimately enabling them to provide a more competitive service.

By contrast, for large financial services corporations, data portability is a can of worms that goes against everything the industry stands for: client data security before everything, Chinese walls and complete isolation of data from the outside world.

Impact of regulation

These contradictions are the result of a host of ambiguities regarding what exactly data portability is, how it is supposed to be implemented, and the ultimate issue of what is client data and who owns it? Such questions are rapidly moving from the philosophical realm into the real world as the newest data protection legislation, the EU General Data Protection Regulation (GDPR), is due to come into force in May 2018. GDPR clearly defines client data as data that helps directly or indirectly identify a client and swings the debate of ownership in a client’s favour. GDPR also mentions data portability as an individual’s right, but falls short of indicating exactly what it is and how it should be implemented.

Staying competitive

Improved access to data will stimulate competition in the banking sector. Reports commissioned by HM Treasury and the Financial Conduct Authority (FCA) have been unanimous in saying that competition in the banking industry is severely hindered by the difficulties consumers experience in taking advantage of the offers of competitors. Data portability offers a solution to this issue, giving consumers the choice over who has access to their data.

Innovation is crucial

The question also arises as to what big banks and other organisations that sit on mountains of valuable client data need to do to prevent it from being snatched and used by competitors.

At Brickendon, our experience of working with a diverse range of clients over the years has shown us that innovation is the key to staying ahead of the curve. The situation is the same for the adoption of data portability – embrace it early and become the preferred destination when clients start hopping from one bank to another.

Organisations should be innovative in the way they mine data and come up with new services to offer to clients. They should become agile to the extent that they can quickly replicate and adopt appropriate innovations brought to the market by their competitors and should review their data models, untangle data infrastructure and update the governance policies to clearly separate client data from proprietary data owned by the bank.

The goal should be to make it as easy as possible for clients to choose who they bank with, but ensure they are not bound for life by that choice. This a very important aspect of the customer experience which will allow new and former clients to join (or re-join) the bank and be integrated easily into their system.

Back to the future

Bill Gates was quoted as saying: “banking is necessary, banks are not…” and there may have been more truth to his comments than anticipated.

The complexity of the road ahead is in effect a call to arms before the data portability issue officially hits the banking market with a tremendous surge of disruptive power. The role banks play in the future of banking remains ambiguous and to some extent in their own hands.

Going forward banks will need to employ top talent in areas such as regulation, data science, and agile transformation. It will ultimately be an exercise of working side-by- side with the client to produce a uniquely tailored approach to make the bank a top performer in an exciting, but ruthless and ever more competitive industry.