Data is the Prize and the Strategy

Big Tech wants your data. It will monetise it for great return and deliver great services to your customers. If banks can’t find a way to do the same, they should give up now and surrender their data to Big Tech.

Banks own petabytes of hugely valuable data. But, sadly, most seem unwilling or unable to recognise or realise that value. To paraphrase the author of Infonomics, Doug Laney; most talk about information as an important asset, but few act as if it is.

Banks’ data it is scattered across the organisation in customer experience, finance and business systems, and risk analysis silos. Getting a single view, let alone calculating value or thinking about how to generate a return on it, is almost impossible.

Most senior leaders and boards see data as ‘something that IT looks after’ and a cost to be managed. Digital transformation programmes tend to look at data within specific silos and at automating or innovating specific processes. Data is treated as a liability and cost to acquire, store or process it the key metric.

Big Tech takes a different view. These businesses actively slurp data at every possible opportunity and spend massive amounts of money to acquire it as an asset because they know they can quickly generate a return from it. Whether through selling advertising, or by keeping consumers within their tightly integrated ecosystems, Big Tech leverages data at every turn to generate revenues in the attention economy. The more data they have, and crucially, the better joined-up it is, the more effectively they can monetise it.

This is a world of data gravity – the more you have, the more you attract. Data gravity not only pulls in new users (and thus more data) but attracts partners, developers and employees to work on richer data sets. It is a virtuous cycle; the more data you have the better understanding you have of customers and their needs and desires. So, you can make better products that attract more customers who provide more data.

Today, banks need to decide if they want to win in this world or cede the field to Big Tech. To succeed they must rapidly kick start this virtuous cycle of data gravity within their own businesses. The critical first step is to change their data mindset. Focusing on individual use cases, and optimisation of specific processes, usually with a cost-saving goal is like re-arranging deck chairs on the Titanic. Banks must invest in improving and exploiting their data asset by driving additional usage, more frequent updates, new uses and new users.  

An orchestrated data platform drives return in both manufacturing and distribution. For example, a neo bank can service a current account for about £30 per year but it costs a traditional bank approximately £150. Real-time analytics running on a single orchestrated data platform can drive automation to reduce these costs. McKinsey estimates that new digital infrastructure like this delivers 20-30% net savings.

On the distribution side, a single view of data assets helps deliver improved customer experience as better monetisation of existing relationships. It will also be able to identify, analyse and test new products to break out of the slow growth cycle affecting the sector.

Banks have an opportunity to beat Big Tech at their own game if they quickly extend data analytics platforms across their entire organisation. Imagine allowing customers to interact directly with their data and manage their daily finances through dialogue with a chatbot! Our own analysis shows that a bank doing this with a platform that makes rich data available to 25,000,000 employees, partners and customers could realise over $15 billion in value from that data.

This is not science fiction; Big Tech can do this today! Banks need to catch up and they need to start now! The COVID crisis and its acceleration of digitalisation, plus the financial and reputational advantages it has delivered to Big Tech, has shortened this event horizon to make this a priority.  

Achieving this is not easy. It cannot be done piecemeal, and it does demand investment and leadership from the top of the organisation. These are not conversations about cost per query for analytics, or whether to store data in the cloud. They go to the heart of the viability of the business, and the role a bank wants, and can play, in the future digital economy. It’s a CEO-level decision with organisation-wide implications.

So, do you want to meekly give up your data and allow Big Tech to monetise it – or do you want to act now and make choices that will ensure it is you that benefits in the digital economy? Find out in my next article which will examine the choices facing banks as they decide what they want to be in the future.