Why Banks and Credit Unions Should Embrace First-Party Data Now
The CFPB's new open banking rule hammers home the implications for financial institutions of digital marketing's long retreat from third-party cookies: How we got here and what's coming next.
By Mark B. Egan
As the marketing landscape evolves, more banks and credit unions are rethinking how they use customer data. With the digital marketing industry continuing to phase out third-party cookies and consumers showing a growing preference for privacy, institutions are beginning to explore the untapped potential of first-party data. The shift offers opportunities to enhance customer relationships and improve marketing effectiveness.
Regulatory changes are also shaping this moment. The Consumer Financial Protection Bureau’s newly enacted open banking rule grants consumers greater control over their data, and encourages financial institutions to evaluate how they gather and apply customer information. For many, first-party data is emerging as a key to navigating this changing environment while delivering more personalized and trusted experiences.
The new CFPB rule explicitly aims to "fuel competition and consumer choice," giving consumers more rights to access their data and control how it is shared. In practical terms, the rule is leading banks and credit unions to reconsider their use of third-party data sourced from data brokers that use cookies to track online activity, scrape the web and public records, and buy data from firms like Facebook and TikTok.
All of this takes place against a backdrop of rising consumer frustration: According to a 2023 study by Pew Research, most Americans are concerned and confused about how their data is being used, with 81% reporting that they are concerned about how companies use the data they collect about them and 67% saying they have little to no understanding about what companies do with the data they collect.
The State of Play
It’s fair to say that companies have a cookie addiction: 88% of businesses use third-party data in their marketing, according to Forbes. However, consumers are becoming more wary about protecting their privacy—a growing number of people are opting out of sharing their data, and third-party cookies are increasingly blocked. All this makes it imperative that financial institutions learn how to make better use of the data they already have.
Financial institutions already possess a mountain of first-party customer data—names, addresses, occupations, accounts held, demographic information such as age and income and credit details and, perhaps most importantly, countless transaction records—all shared by customers directly and with their consent. When banks and credit unions make better use of their first-party data, marketing outcomes improve: Research shows that campaigns using first-party data generate higher click-through and conversion rates and better returns on investment.
Using first-party data is particularly helpful for financial institutions in three areas:
Customer retention: Banks and credit unions can use first-party data insights on customer behavior and preferences to personalize offerings. For example, financial institutions can shape campaigns around life events, such as birthdays, weddings, anniversaries or children going to college. Making marketing more engaging improves customer experience and loyalty and reduces churn. In April, JPMorgan Chase announced a new unit, Chase Media Solutions, that will generate personalized cash-back offers for customers based on insights from their transaction data. Using personalized offerings to improve the customer experience is vital because 55% of people say they would stop doing business with a company after just one bad experience, according to PwC.
Upselling: First-party data can be invaluable for upselling. For example, not all checking account customers will want a mortgage, but first-party data — in this case monthly ACH payment records—can identify those account holders who already have a home loan elsewhere and therefore might welcome a compelling refinancing offer. Financial institutions can also use first-party data to guide customers towards services that they could benefit from using, such as a new credit card with an appealing loyalty program.
Customer trust: Why not ask? At a time when trust in business matters more than ever, banks and credit unions can level up by actively engaging with customers to gain their permission to use their data and to personalize how they would like that data to be used. Maintaining trust is vital when you consider that 13% of bank customers say they are likely to switch institutions in the next 12 months, according to J.D. Power.
What’s Next?
Transitioning away from third-party data to first-party data makes sense for banks and credit unions with long operating histories and large customer bases, offering the prospect of reducing the compliance risks associated with an overreliance on third party data while also improving the effectiveness of marketing campaigns. But, as with any major tech change, financial institutions will need to invest in appropriate ways to better use their own data. Among businesses generally, 41% say they find it hard to understand data because of its complexity and the difficulty of accessing it, according to a survey by Salesforce.
As a result, 73% of companies plan to invest in improving their data skills and spend more on employee training to boost in-house know-how.
Help is on the way. In September global standards-setting body IAB Tech Lab launched its new open standard Publisher Advertiser Identity Reconciliation (PAIR) protocol. PAIR aims to facilitate advertisers and publishers matching and activating their first-party audiences for advertising use cases without third-party cookies.
"Utilizing first-party data is an important and cost-effective way for advertisers to reach their audiences, but the process hasn’t been smooth so far, discouraging brands from being on top of it," iQuanti wrote in its Q3 Performance Marketing Report for Banking and Financial Services report. "This could be the update that helps them have a better handle on it."
The new protocol, based on Google technology, will provide "a path to unlocking first-party data in secure and privacy-centric approaches," said IAB Tech Lab Chief Operating Officer Shailley Singh, in an announcement last month. "It’s an important step forward for privacy-first advertising."
The PAIR protocol, coupled with a new first-party data tool from Google called Ads Data Manager, could help marketers optimize use of first-party data in their campaigns, both for better personalization and more accurate customer segment targeting.
In addition, Google’s Privacy Sandbox initiative is playing an increasingly significant role. Introduced in 2019, Privacy Sandbox is a set of technologies designed to replace third-party cookies with privacy-focused alternatives. These tools, including the Topics API and FLEDGE, allow advertisers to target users and measure campaign effectiveness without compromising individual privacy.
