For the second session of the Oxford Saïd Customer Executive Education partnered by Teradata, we were fortunate to have Professor Pinar Ozcan as our guest speaker. Ozcan is Professor of Entrepreneurship and Innovation at Oxford Saïd School of Business and she also serves as the Director of the Oxford Future of Finance and Technology (Fintech) Initiative. The topic for this workshop was Disruption, Fintech and the Rise of Platforms so Professor Ozcan was the perfect choice to lead as her current research includes an examination of industry disruption as a result of new regulation, the entry of fintechs, and the development of the sharing economy.
Once again, it was encouraging to see that academic research and thinking closely mirrors our experience in speaking to customers across the financial services market. We all agree that not only is data a massive asset for incumbents, but it is one that new entrants, be they start-up fintech challengers or big tech behemoths don’t have. As I argued in a previous blog post
, Big Tech wants banks’ data, and they will make good use of it to understand and deliver better services to their customers. Banks have a rapidly narrowing window of opportunity to defend and leverage their data advantage or risk a future as low margin ‘financial plumbing.’
Professor Ozcan’s insights confirmed for me that banks must quickly figure out the best ways to integrate, orchestrate and leverage the unique data they have and focus it on improving customer experience whilst at the same time increasing efficiencies. The disadvantage they have, compared to both Big Tech and FinTech, is that their data is fragmented across multiple silos making its integration, analysis and deployment to dive value harder. Creating enterprise data platforms that promote integration and re-use of data, as well as creating data-cultures internally that see it as an asset rather than a cost, are two strategic imperatives we see today.
Stepping up to the platform
Integrating and understanding the value of the data assets they hold is also a critical first step in preparing for what Professor Ozcan saw as the inevitability of the platform economy. Some of the world’s most valuable businesses today, from Apple to Uber, have succeeded by creating platforms. They provide services that attract customers, and then use customers to attract a wider range of services that create additional revenue and margin. It becomes a virtuous circle with each new customer adding value to the overall platform through network effects. Driven by customer experience, and feeding on constant data, they are becoming the primary ‘on-ramp’ to a vast array of services. Banks need to think how best to leverage these platforms in ways that avoid them becoming the dumb pipes behind someone else’s user interface.
Not only do banks have the transactional processing capabilities that most platforms currently lack, but they have deep insights into all kinds of meaningful customer behaviour. They may only just now be finding ways to leverage these insights and the temptation is to jealousy guard their ownership of the customer in order to maximise them. But collaborating and joining the right platforms might be the way to open new doors to growth. Open banking initiatives provide both the carrot and the stick to join these platforms. Simple but feature-rich integrations can deliver the promise of open banking, freeing customers to move and use their data where it makes most sense for them.
But open banking also creates the potential for banks to create innovative ecosystems around themselves. Taking inspiration from the platform plays of tech and mobile leaders, they can look to attract value-added services that can consume sub-sets of their data to offer new and sticky services to existing customers as well as win new customers for core services.
Build your own
Whether joining an existing platform, or using the approach to build an ecosystem, finding the right cultural fit and the right relationships with the right platforms should be a strategic focus for banks. Preparing data to be easily integrated and ‘plugged-in’ this API-centric world is the vital step in this cooperation. But data is not the only asset that banks have and not every collaboration has to involve data. Trust, brand-fit and the overall customer experience they want to create are all key considerations. Deep understanding of customer behaviour, awareness of what they value and where they may have un-met needs should drive these decisions. As with big tech, constant analysis of data combined from every touchpoint will clearly identify the areas where partnership can add value.
In the early days of the platform economy banks shied away from engaging. This may have been sensible, as I’ve argued elsewhere
, oversharing of data can provide competitors with the tools to disintermediate you. But banks should also be confident in their own advantages. They have robust, secure, scalable systems that fintechs and big tech find it very hard to replicate. They also have cultures that understand regulation, governance and risk. If they can orchestrate and leverage financial data analytics to really understand their customers they can prosper and win in the in the digital, mobile first world.