Tuesday marked the end of OfCom’s consultation on Open Communications – an initiative designed to enable customers of telecoms and pay TV companies to have their data shared with third parties of their choice.
This initiative may sound familiar. Burgeoning smart data initiatives are also in development in the energy, pensions, and finance sectors. These are all the younger siblings of the banking sector equivalent - Open Banking - which has been in force for three years and allows third parties to build financial products linked to customers’ payment accounts.
As someone who has spent 15 years driving digital change for banks and the past four listening to them about their problems and helping them innovate, the limited number and scope of these largely siloed smart data initiatives gives me cause for concern.
Their aims are laudable, and granted the UK’s Department for Business, Energy and Industrial Strategy is launching a cross-sector smart working group to co-ordinate and accelerate Smart Data initiatives across regulators and government.
But at the tail end of 2020, the existence of a single functioning open data initiative in one regulated sector and early-stage developmental initiatives in four others is nowhere near where we need to be. The pace of progression needs to be accelerated across many more sectors, unregulated as well as regulated, if it is to support and not stifle the development of innovative, data-driven, personalized products and services that customers want.
Let’s take banking as an example. Much of my work involves helping banks to drive digital innovation. Helping them to design products and services specifically to address problems customers face in their lives, rather than pushing products and services they believe they can sell. In practice what this means is that solutions need to be unencumbered by existing sectoral boundaries. A customer seeking a mortgage is also highly likely to be seeking a wide range of products and services around the same time including estate agency, conveyancing, surveys, removals, buildings and contents insurance, mortgage life assurance, and furniture. None of this is banking, but why should a bank not become a curator of a broader range of these services, opening up new revenue channels by providing customers with a wider range of things they need via a convenient, digital platform? This is customer centricity at its purest. Think customer first, not product first.
The gap between what customers need and what banks supply is vast. The potential opportunities are monumental. A report from the Economist Intelligence Unit (EIU) and Temenos, based on an analysis of over 10 million online conversations about personal finance, reveals that retail banks are only associated with 18 percent of all personal finance discussions, with the rest covering everything from divorces and wills to car buying. This suggests there is room for banks to assist customers in many more areas of their personal finances.
These opportunities extend well beyond personal finances. The rise of super apps, marketplaces of services and offerings made most famous through Chinese super products WeChat and Alipay, have demonstrated the value of catering for the broader lifestyle needs of customers. This is life underpinned by banking, rather than the other way around. Others are following suit. In South Africa, for example, Vodacom is planning to roll out a super app that will allow customers to do everything from pay for a morning coffee, listen to podcasts, send money to their entire family, pay utility bills or shop online in one transaction. All from one mobile app. Embedded banking at its best.
In banking, there is a huge thirst for this kind of transformation. Nearly half of senior global banking executives (45 percent) responding to an earlier EIU report said they aimed to transform their business models into digital ecosystems that integrated their own products with third-party banking and non-banking products and services.
So where does smart data come in? Quite simply, in the digital world, smart ideas require smart data to make them work. Data is the food that feeds innovative technology and allows it to deliver hyper-personalized services. So, providing a secure and standardized way of sharing data makes it much easier to create innovative new services that do things like notify customers when they’re hitting their financial goals and automatically trigger product upgrades or manage their disparate finances from one platform. In short, create services that are of true benefit to customers.
Becoming a practical reality
Over two million consumers and SMEs are already using open banking-enabled applications in the UK. But imagine if you opened up this kind of data sharing framework not just to energy companies, telecoms and finance providers, but also to retailers, transport companies or health businesses? The possibilities for innovation expand considerably.
Much of the innovation work we do with banks involves helping to change their mindset so they think more like Silicon Valley start-ups, in order to develop truly customer-centric, personalized digital experiences for their customers powered by data, analytics and artificial intelligence. These solutions can be delivered through their own products and services or in collaboration with partner companies.
By its nature this kind of innovation should not be constrained by artificial sector boundaries. A customer’s problem isn’t, so neither should the innovative idea that solves it. But the delivery of that idea may well be, if the customer data required to make it work isn’t easily and securely accessed and shared.
This is why Smart Data initiatives must become a practical reality across many more sectors, and at a much faster pace. Because if they are not, what customers really want from all their service providers will be much more difficult to deliver – that hyper-personalized feeling of really being understood, not as a customer, but as a human.
Kam Chana, Product Innovation Director, Temenos