Google will end the era of third-party cookies this year. Consumers and bankers alike may rejoice that their browsing data can no longer be sold and that fewer ads will follow them around the internet for shoes they bought last week. But what does it mean for banking institutions’ future ability to retain and acquire customers?
Chase’s announcement in early April of its new advertising platform, which leverages banking data on 80 million customers, is a canary in the coal mine for some institutions and an invitation to innovation for others.
First-party players, Google in particular, but also Facebook, TikTok, and other social media platforms, will now command far more control over access to their users. And, retailers like Amazon and Walmart will press their advantage as advertisers to the enormous customer bases assembled through personalized engagement.
Banks and credit unions must now decide if they will take their transaction and online banking data, the trust of their account holders, their safety and security, and become more competitive as first-party data players. Will they follow Chase and pursue an even greater role in commerce? Should they?
What’s Really Happening with the End of Third-Party Data?
Mozilla Firefox and Apple Safari dropped third-party cookies a decade ago. Yet, Google singlehandedly kept the party alive with its Chrome browser, used by 63.6 % of internet users worldwide in 2023, according to Statista.
So, to be precise, Google is not ending third-party data in the third quarter; it’s ending access to its own first-party user data for everybody else.
For advertisers, reports suggest that costs for digital marketing and customer acquisition will rise next year as a result. McKinsey reported that those marketers and companies that do not figure out a strategy to grow “their access to first-party data may have to spend 10% to 20% more on marketing and sales to generate the same returns.” In 2021, about 44% of marketers predicted the marketing-spend increase tied to the end of third-party cookies could even be as high as 25%, according to HubSpot.
But increased ad pricing is just the tip of the iceberg. The changing landscape in the power dynamics of online data should be on the mind of every banking executive team.
The Good News: Curbing Advantages for Banking Disruptors
Financial institutions have mountains of banking data. It provides an advantage but only within its scope: The current customer base and those who’ve applied for products and services. When it comes to acquiring new people looking for banking products, especially people researching online, financial institutions have largely left prospects to be snapped up by other providers — namely, fintechs.
Nearly half of the checking accounts opened in the United States in the first half of 2023 were opened with digital banks and fintechs, according to Cornerstone Advisors. And it’s not just that companies like Square or PayPal have great products. Square courted new customers while traditional banking institutions were waiting for people to convert on their websites.
Look closer at what institutions expect of consumers and businesses; Square’s opening to take accounts has been as wide as a barn door, especially with third-party data. It’s simple: A business visits a bank website on Chrome and navigates to the webpage for business checking. Once they arrive, they’re usually treated to a few bullet points about product features, and then they see a button to “apply now.” Short, sweet — and ineffective.
The Rising Trends:
About every other checking account opened in the U.S. in the first half of 2023 was opened with a digital bank or fintech.
If the prospect is unsure that they want to bank with the institution, they don’t apply. And then nothing happens. There’s no courtship; it’s a marry- me-now-or-we’re-done approach. When businesses didn’t take the hint, Square scooped the third-party data and courted them elsewhere. Voila, Square grows to 4 million business customers using browsing data gleaned from banking institutions’ websites.
It will become more expensive now for Square and PayPal to do this. That’s the good news. The bad news is that it happened in the first place. Through Google, Square could disregard the advantages of banking incumbents.
Forget third-party data. The battlefield that has cost banks their customers and credit unions their members has always been over first-party data. Earning new customers online is a game of personalization, and other players have been profiting from the lack thereof on banking websites.
First-Party Data Giants Play for Keeps
About 83% of consumers are willing to share their data to create a more personalized experience. And 91% say they are more likely to shop with brands that provide offers and recommendations that are relevant to them, according to Accenture.
These consumer preferences now power the dominance of social media, retail, and tech giants. People save their entire digital lives in the Chrome browser’s bookmarks – along with passwords to their online banking. Because of that convenience, people come willingly to its walled garden, and once they do, they stay. Google can now absorb the $700 billion third-party data industry because it loses nothing and gains enormous market share. What stops it from using its closer connection to people’s digital lives to displace other industries – including banking?
Google is unique in its success but not in its approach. Most social media, retail, and tech giants are the same way. They differ on data specialization—preferences, interests, purchases, browsing history, or combinations thereof—but they all excel at using data for tech-based personalization, which they use to acquire new customers and keep them.
“The battlefield that has cost banks their customers and credit unions their members has always been over first-party data. Earning new customers online is a game of personalization, and other players have profited from the lack thereof on banking websites.”
Walmart, Amazon, Facebook, Apple and Google have all competed for banking services of some kind, payments in particular. Once inside any of these walled gardens, these companies churn first-time customers into loyal users. Walmart’s banking platform, ONE, has grown to 1.6 million customers using this very approach, according to online sources.
Banks and credit unions must decide now if they continue their marry- me-now-or-we’re-done approach on their websites – leaving undecided prospects to be won over by other players. Or, will they become the best walled gardens for financial services: Safe and secure, trusted, and personalized?
Financial institutions were the first walled gardens in the U.S. economy. They’ve gained a unique and powerful type of first-party data on consumers and businesses with the rise of core banking and digital banking. Now is the time to bring it forward to their web personalization in ways only they can.
A Nationwide Bank Already Making First-Party Plays
For its part, Chase Media Solutions plans to connect brands directly with the financial institution’s customers who are “digitally engaged” with the bank — which it defines as any consumers who have logged in to “web and/or mobile platforms…within the past 90 days.” Chase can now personalize like Amazon but with marketing channels that see consumers more deeply than Google.
“Like retailers, we have first-party data and a dedicated audience. But what sets us apart is the unrivaled scale and insights from our customers – having long served as a trusted guide for their financial decisions,” Rich Muhlstock, president of Chase Media Solutions, said in the bank’s announcement.
How could this yield deeper insights than Google in advertising?
It’s the bank’s immense and unique first-party data. Google can see intent via search activity. A bank can see actual purchasing activity. Chase sees what people buy, not the bigger set of things they’ve considered buying. The data set is smaller than Google’s, but it includes transactions. “Chase reaches across brands, merchants and shopping verticals, providing a comprehensive view of purchase behavior,” Muhlstock said. “This strengthens the degree of personalization, helping brands deliver offers that stoke consumer interests.”
Chase Media Solutions designed 30-day campaigns for Air Canada, Solo Stove, Blue Bottle and Whataburger, and said the companies have seen “significant traction for those brands in driving incremental sales and new customers growth.”
The nationwide bank’s move here also monetizes its data, as Cornerstone Advisor’s Chief Research Officer, Ron Shevlin, observes. “Chase will sell ad space on its digital properties to advertisers [and] improve ad targeting by analyzing the customer’s spending patterns. It’s a great move…because it will make money selling ad space and generating more sales on its cards. It is appealing for advertisers because–unlike other advertising approaches–they only pay when the customer makes a purchase,” he said. “This is a stroke of genius; the new advertising service could enable Chase to bundle – at some point–pricing for the advertising with interchange fees.”
No one liked the third-party data experience. But banking executives should remember where it came from. Big tech allowed it because it was so lucrative. It’s ending an industry now because it’s also lucrative. When big tech takes, it keeps; banking must do the same.