Wednesday, April 13, 2016

Will a time come when banks pay us for our data?
By Mark Johnson – CEO Receipt Reliance Pty Ltd

For some time now I have been talking about a concept of digital receipts being stored at your bank where we utilise the prevailing global payment rails to transmit digital copies of merchant receipts back to a customer’s issuing bank and make those receipts available as an attachment to the payment transaction that we already get on our bank statements/ledgers.

We have envisaged that a bank would levy a fee for providing the receipt service and certainly all the research suggests that customers are more than happy to pay for a real and tangible service, something which improves the quality of their lives. No more lost receipts are a great incentive.

There are also many benefits for all three participants involved (the customer, the merchant and the bank, as I have outlined in a previous blog “Digital Receipts at Your Bank: WIIFM?” and banks in particular are turning their attention to direct, contextual, location based marketing that could become available to them by accessing line item data as can be sourced from a digital receipt.

Now queue privacy and trust!

To date,  banks have enjoyed a strong position of trust and I would suggest a lot of that is to do with the low profile banks currently take in relation to how they market to their customers.

Banks aren’t in your face with their marketing, unlike other platforms that follow you around for what seems like forever, because you happened to do a bit of window shopping and look at some products. I recently had a look at a Seiko watch online and was subsequently bombarded with adverts for Seiko and other watches despite the fact I was no longer interested. Personally I find this sort of marketing intrusive and it heightens my concern about privacy on the web.

So far banks don’t do this in any significant way and if they do, it is pretty low-key. As a result, customers don’t really appreciate the massive amounts of data banks already have on our day to day life. This softly behind the scenes approach has instilled trust and loyalty in us.

Nevertheless, banks are now looking to get into the direct marketing game in a bigger more targeted way. This article by Chris Skinner from the Financial Services Club The top ten trends in banking innovation makes some interesting observations about predictive analytics at item 6 and I quote:

“It’s funny how I’ve about banks being disintermediated since the 1990s and yet they’re still here and they’re now bigger.  I don’t believe banks will be disintermediated or, as we now call it, unbundled.  Banks instead are reintermediating and rebundling everything and this trend proves it.  There are various examples of this, specifically the idea of predictive analytics and partnering to remind you that you that it’s your partner’s birthday today, for example.  The idea here – a stretch for most banks – is that the bank will not only know it’s their birthday, but will tell you what you brought them for Christmas and for last year’s present, and suggest things they might like this year.  I can’t believe this one right now, but apparently Alfa Bank (Russia), CBA (Australia), Santander (Spain) and Caixa (Brazil) are already well on the road to making this happen”.

Banks will need to tread very carefully if they want to avoid breaking that significant trust bond with customers, something they have spent many years cultivating. However, if we get back to the premise of this blog it would seem that banks might be able to have their cake and eat it too!

What if, instead of perhaps thinking about charging customers to keep their receipt data for them, banks actually paid customers to use their data? Because it is now becoming very obvious that there is a strong business case for banks to monetize this data in a variety of ways particularly as line item data from merchant receipts goes a level deeper than Metadata currently being exploited.

There will of course be a group of customers who will have strong privacy concerns and would not want to have their receipt data available for purposes other than their own personal use. But the great majority would like to enjoy some benefit from the use of their receipt data.

Let’s imagine in a brave new world there are several levels of receipt access via your bank. For example:

1.       Only customer sees their own data  
2.       Anonymous data is available to bank  
3.       Full receipt data is available to bank

In exchange for various levels of data, banks will reward customers. This could be in the form of a payment, reduced or zero fees, product discounts etc or whatever works for both the bank and the customer.

The obvious benefits for banks would be KYC enhancements, PFM tools for their clients, fraud detection and prevention, reduced interbank fees from client queries, revenue generated by data monetization to name a few, all of which can be extremely profitable for the banks and certainly outweigh the cost of  rewarding customers for their receipt data.

The customer relationship and loyalty enhancements alone will have a long term financial gain for the banks. It will make their customers extremely sticky and as we all know it is far more costly to get new customers than to retain existing ones.

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