Data & Analytics

09:00 AM
Dominic Venturo
Dominic Venturo

Penny for Your Thoughts

Banks must learn how to use personal data for the benefit of both the customer and the financial institution.

Much has been written about the rise and claimed descent of the Personal Data Economy in the past few years. The premise of the Personal Data Economy is that consumers will take control of their personal data and monetize it with interested parties. Consumers (and potentially businesses) may control and monetize their data directly -- in the form of offers, discounts, or deals -- or indirectly by using a service for free that might otherwise cost money (Facebook, Twitter, Open Table, Yelp, etc.). However, a seemingly continuous spate of data breaches may have dampened the enthusiasm for consumers to try new services and participate in the Personal Data Economy.

The ideal foundation for interactions with consumers is to provide transparency about what data will be shared and for what purpose, and to seek consent before using personal data. However, in the recent publication from the World Economic Forum, "Rethinking Personal Data: A New Lens for Strengthening Trust," the authors say that the Internet of Things creates an environment where clear disclosure is either impossible or overwhelming. This is due to the behind-the-scenes way these devices communicate, as well as the sheer volume of data being transmitted in real-time. This seems to be a reasonable assumption. However, the rationale that it is too difficult or overwhelming for the consumer to provide disclosure and seek consent is unlikely to be a winning strategy with consumers.

The important takeaway here is to consider how to create structures for what data will be shared, when and how it will be shared, and to what end or benefit for the consumer. Many popular services demonstrate that customers are willing to share their data in situations where the value to them is evident. An example would be the Progressive Snapshot service for drivers. Progressive customers install a device that monitors their driving behavior and shares it with Progressive in exchange for the opportunity to earn discounts. Customers earn discounts by driving safely. Progressive says that more than 1 million customers have agreed to share the personal data captured by Snapshot for the benefit of both parties -- Progressive and its customers. The data-sharing economy, in this instance, is alive and well.

What does this have to do with banking and technology? Everything. Financial institutions are uniquely positioned in terms of the trust placed in them and the amount of data they manage and protect around the clock every day of the year. In a 2012 survey cited in the World Economic Forum report, banks and financial institutions ranked highest among offline actors in trust to protect consumers' data. The industry has long used this data to serve customers and help manage risk. This is not new. However, the available data sources have increased exponentially in our always-on, always-connected digital world. Consumers who have downloaded mobile apps for banking may be able to grant permission for the bank to use location services to improve service and security, or to make special deals or offers available. Those same consumers might opt into a marketing program in which they share anonymous purchase information in exchange for valuable offers from merchants that want to earn their business. All these preferences must be managed, and the data must be protected and stored in increasingly massive and secure data centers. And, of course, the appropriate privacy policies that are transparent, simple to understand, and reinforce personal control must govern it all.

Using spending data is but one example of the new personal data economy and the business models bankers and their technology partners must consider to remain relevant and help make customers' financial lives better. How the data is used and how that meets consumer expectations will determine if this model is indeed better or just another bit of noise to tune out and turn off.

Dominic Venturo is chief innovation officer for U.S. Bank Payment Services. In this role, he leads a team of visionaries who see potential in emerging technology or business models and adapt those to fit customer needs as they understand them today or how they envision them ... View Full Bio

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