Transaction data has long been touted as the “data gold mine” that banks and credit unions need to tap. They are now beginning to do just that. The Associated Press reports that analytics firms such as Cardlytics and Augeo are helping several of the largest U.S. banks as well as smaller ones make targeted offers based on having analyzed a consumer’s spending. As Silvio Tavares, President of the CardLinx Association, told AP, “Banks have the secret weapon in that they actually know what we spend money on.” It’s a better predictor than search history on Google, he observed.
Many people — but not all — have become used to digital ads appearing to match their current or previous web search history. Whether they’ll get used to their bank or credit union making an in-moment offer based on their actual recent spending is another question. The AP article cites Marcos Meneguzzi, HSBC’s U.S. head of cards and unsecured lending, saying that consumers may welcome such offers when they’re relevant. But he also believes financial institutions could easily overstep and lose their customers’ trust.
“Whether consumers will welcome banks and credit unions making in-moment offers based on actual recent spending is an open question.”
An Accenture survey found that already 20% of banks monetize transaction data by delivering actionable insights and that 75% aspire to do so in the next three years. The consulting firm, which encourages financial institutions to pursue this strategy, also notes that monetizing customer data is difficult to do well while also protecting consumers’ information. “As incumbents explore this uncharted territory, they must tread lightly to protect the integrity of customer relationships,” Accenture states.
Many financial institutions today focus on data governance from the perspective of compliance, with the aim of avoiding financial penalties. Plenty of existing regulations cover data privacy and security, but the arrival of the California Consumer Privacy Act (CCPA) in January of 2020 has heightened financial marketers’ attention. CCPA was inspired by the European Union’s General Data Protection Regulation, which went into effect in 2018. These laws regulate, among other things, citizens’ access, transparency, and consent surrounding their personal data. They’re also driving conversations in other states and in Washington. These two laws are likely just the tip of the iceberg.
Consumers’ Evolving Views on Data Use
Rather than viewing the heightened scrutiny over the commercial use of consumer data as an impending train wreck, Tealium, a data governance solutions provider, believes that the trust associated with data privacy has gained so much clout that it’s now a competitive differentiator. In a report aptly titled “Trust is Golden,” the company explores how brands can benefit from the prioritization of an appropriate data privacy strategy. It points to Apple as a notable example of a company that has staked out data protection and privacy as a major competitive weapon. As the report states, “Privacy isn’t just about avoiding financial repercussions, but also the arguably costlier impact of diminishing consumers’ trust and lifetime brand relationship.”
Tealium surveyed 1,000 consumers about their relationships with brands and personal data privacy. Here are the notable findings:
- Just over half of consumers (59%) think businesses are doing a good job handling their data, but 71% also say they don’t think it’s possible to have total control over their own online data.
- Four out of ten consumers say that, other than themselves, businesses are the most responsible parties for protecting their data — higher even than the federal government.
- Only 38% of consumers say they always read a brand’s online terms and conditions; the rest rely on companies to do the right thing.
- While trust is the default, it’s also tenuous. Just 15% of respondents are more likely to forgive data missteps from brands they trust.
- Half of consumers don’t feel well-informed about how businesses are using their data.
While these findings are not specific to financial institutions, they suggest that banks and credit unions — which generally speaking are more trusted than the average business but also held to a higher standard — have a lot of room to become more transparent about their data policies.
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Willing to Exchange Data for Value
The Tealium survey asked consumers how willing they would be to share personal data in exchange for something from a company. This is a key premise that financial marketers have been counting on.
The results suggest there is much work to be done: 43% of respondents say they would provide detailed data about themselves for a discount, while 32% would offer such data in exchange for exclusive benefits or perks.
Data from an Ipsos/World Economic Forum survey in late 2018 found a somewhat greater inclination to share for value. Exactly two-thirds of consumers (U.S. internet users) in that survey said they would share personal information for a discount or reward. The same percentage also said they would share if a financial institution promised not to share or sell the data to a third party.
The survey results, reported by eMarketer, indicate that the largest group of consumers are comfortable with sharing data if brands are clear about what they plan to do with it.
“Think about how your grandmother would react if you explained how your institution handles customer data.”
This finding reinforces what Tealium calls the Golden Rule of Data: “Treat consumers’ data as you would want yours to be treated.” The company observes that in the heat of a high-profile marketing campaign, it’s easy to forget that data represents individual people.
“Think about how your grandmother would react if you explained how your business handles customer data,” the report states. “If this exercise makes you uncomfortable (or if Grandma would be appalled) your company likely needs an adjustment in both mindset and practices.”
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Suggestions for Turning Privacy Into a Competitive Asset
The report offers detailed directions that financial institutions could use to 1. avoid running afoul of CCPA-type rules, and 2. transform their business model to count privacy matters as a game-changing competitive opportunity.
Here are several of the most pertinent findings for financial institutions.
Tell the story of how the institution is using data to create a better and relevant customer experience. Don’t assume consumers know this. “It’s an exercise in honesty that shores up consumers’ trust in your brand, and helps explain why you need their data,” the report states. Become like Spotify, whose 217 million customers know that its collecting data every time they listen, but is using it to constantly improve individual playlists.
Push back on Legal and rewrite your privacy and data-use policies. “Consumers are starving for companies to explain their practices in concise, straightforward language,” Tealium observes. “Doing so will bolster your company’s reputation as trustworthy — the clearer your policies, the less it appears you’re hiding something.” Helpful tip: 45% of consumers want to see examples of how their data is used.
Transparency, transparency, transparency. Don’t wait for privacy transparency to be the letter of the law rather than the exception. Financial institutions looking to responsibly maintain consumer trust now should be upfront about data use, as well as next steps in case it is handled incorrectly. And in order to truly ensure accuracy, companies must maintain a single source of truth for customer data.
Make privacy a company effort. If trust hasn’t previously been a messaging priority, identify internal leaders who can act as a council of data stewards and get participation from Marketing, IT, Business Intelligence and other teams. Customer trust must become a core value.