There’s a story everyone probably knows by now, but it illustrates the challenge of using data to personalise services
The story is of Target, the US retailer, that analysed buying habits of customers and found pregnant woman purchased more unscented lotion and supplements, like calcium, magnesium and zinc, in their second trimester. So they targeted them with coupons and offers for baby clothes and accessories.
The tale goes that an angry man went into a Target store demanding to talk to the manager. “My daughter got this in the mail!” he shouted at the manager. “She’s still in high school, and you’re sending her coupons for baby clothes and cribs. Are you trying to encourage her to get pregnant?”
The manager didn’t have any idea what the man was talking about. He looked at the mail. Sure enough, it was addressed to the man’s daughter and contained advertisements for maternity clothing, nursery furniture and pictures of smiling infants. The manager apologised and then called a few days later to see how things were.
On the phone, though, the father was the one apologising. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”
This story lays the basis of what banks and any other companies should consider when they are using their customers’ data. Firstly, they need permission to use that data. Secondly, they need to know what is sensitive, what is private and what can be shared and used. Thirdly, and most important of all, they need to be intelligent with the data.
The first opportunity is easy, but is going to get slightly more difficult with the European Union General Data Protection Regulation (GDPR). Under GDPR you have to show how you are using customers’ data and show clear compliance with permissions or fall foul of the law.
This is where the second part becomes interesting. Sharing my name and address with a third party may not be a problem as they could get that from an electoral register, but sharing my income is personal. Did you check you had permission on that one?
And the third is the toughest part because banks aren’t particularly good with customer data. Much of the data about customers in a bank is in lines of business that separate and fragment that knowledge of the customer.
Equally, much of the processing in a bank is through a variety of different systems. Your credit card payment can pass through one system, while your standing order through another and direct debit through a third. In fact, most banks have dozens of different computers processing everything in a specialised way with little integration or holistic view of who you are as a customer.
This is the biggest challenge as there are many new players coming into the world of finance that are intelligent with data. Think Facebook, Apple and Amazon. Under new EU regulations they now have the right to demand access to your bank data and, if you give them permission, the bank must share that data with them.
So what do you think Facebook will do when it can easily connect you to all your friends to send money or when Amazon can allow you to not only see your orders, but the banking flows that go around those orders?
This is one of the banks’ biggest fears, namely that the internet giants will use customer data really intelligently to give you better service and better understanding of how you paid for what, when and to whom. But isn’t that the real customer need here? To be intelligent with my data if I give you permission to use and store it? Don’t tell my dad I’m pregnant, but do tell my boyfriend he needs to buy a Bugaboo.