Banking
How Digital Banking is Opening the Door for Greater Consumer Data Transparency
Global Banking & Finance Review®
Company
By Brian Mandelbaum, Founder and CEO of Klover, a leading fintech app that provides high-level analytics of buyer behavior by capturing users’ spending data and compensating them for it.
The fastest growing commodity in terms of value in our world is not bitcoin or oil, it’s data. It’s not just about having data but the ability to use data. Companies like Google and Facebook are some of the largest companies in the world as a result of this highly valued commodity, leaving many to wonder how and why companies collect their data, and what is done with it. The digital natives of the world, in particular the United States, understand there is a quid pro quo to having access to Gmail or Instagram as a source of entertainment or utility, but what they are learning is that they could and should be trading that data for tangible value. Further, they want their experiences to be driven by them, not forced on them.
How does this concept affect the banking and finance world? It is opening doors to new forms of financial services, like Robinhood, that are finding alternative business models vs. traditional out-of-pocket fees. This is a ripple effect that is moving across every industry, including the rise of “neo-banks.”
From Forbes, “Neobanks, sometimes referred to as ‘challenger banks,’ are fintech firms that offer apps, software, and other technologies to streamline mobile and online banking. These fintechs generally specialize in particular financial products, like checking and savings accounts. They also tend to be more nimble and transparent than their megabank counterparts, even though many of them partner with such institutions to ensure their financial products.”
Digital natives expect convenience, speed, and transparency, further, they demand security and tangible value for their patronage. However, the business model is primarily the same as their institutional predecessors, it’s a glaring hole, they still are dependent on charging consumers various fees and “donations” to thrive leaving them susceptible to traditional banks entering and stifling their growth.
Enter stage left: Data, and enabling users to leverage said data in exchange for premium financial services, tools, and even direct cash. Let’s call it a “data dividend.” This paradigm can truly disrupt the financial services industry whereby consumers willingly share their data (zero-party data) in exchange for these services. Think about this for a second, financial transaction purchase data is the most valuable data a marketer can get. This data shows not only intent, but action and measure down to the very last cent.
What is “Zero-Party Data?”
Zero-party data is declared, or consented data, that consumers intentionally and proactively share with a brand or company, often in exchange for something of value or personal interest.
The power of zero-party data is that it is ethically sourced and can be commoditized, delivering new sources of revenue for businesses in various ways, from marketing to analytics. A prime example of how consumer data increases in value can be seen through the push for more and more privacy regulations. Notably, Facebook’s announcement of potentially missing out on $10B in revenue as a result of new iOS privacy tools to limit consumer tracking speaks to the volume of these changes on a global scale. A major driver of this strategy is the exponential value of quality transactional data. There are numerous businesses in jeopardy as they await the cookie apocalypse, and even the recent State of the Union address directly referencing privacy regulation and social media targeting is yet another bellwether of what’s to come.
From our data, neo-banking users tend to be predominantly Gen Z and younger Millennials, also known as digital natives, that are savvier about what their data is worth and are not as brand loyal to legacy banks and their services. New horizons are afoot for financial services that will continue to pressure an evolution of business models to drive growth.
Zero-party data is essential to informing customers about relevant products and services at the most intimate level– financial. Understanding your customers’ buying behaviors, income, and other financial information helps to better serve them both internally and through business partners. Regardless of having access through existing accounts, the key is ensuring that the data capturing is consented to in exchange for real value. The current cohort of digital natives does not look kindly on opaque terms and conditions and expects to be in full control of their data. If you choose to leverage this kind of information, be transparent and highly ethical, providing easy and convenient ways to opt-out if the customer so chooses.
Companies taking a zero-party approach must be explicit about providing a key-value, access to premium financial products and tools in exchange for this consented customer data. Foundationally, this approach leverages data ethically and, in fact, empowers users to monetize their own data to work toward goals like financial freedom. Furthermore, ensuring that users are receiving highly customized experiences on platforms and throughout the digital ecosystem is a key winning strategy for fintech companies.
Explore more articles in the Banking category
