The financial services industry is undergoing serious disruption, as fintech upstarts yap at the heels of the established institutions, offering services like payments and money transfers for a digitally engaged, mobile audience.
Many of the main players in banking have been around for centuries, how can they stay ahead of these more nimble competitors, who use data and other digital tools to try and get ahead of the game?
In the case of Barclays they have tried to fight fire with fire, placing data at the heart of the strategy to engage customers, help customers, and build trust with customers.
The main at the centre of this is Peter Simon, Head of Information at the bank.
"What we started just over a year ago is to start to think about data less as something what happens in the IT department, and something that underpins, to something that is a customer asset that we need to treat effectively as a business and a thing," he told CBR.
He says that the firm’s scale puts it in a strong position: "If you think about Barclays we have 20% to 25% share of the current account market, we have 30% of the credit card market with Barclaycard, we see a lot of the UK economy both from retail customers and for businesses."
If Barclays decides to build services built on top of large data sets, it can do so and then "roll it out to 16m retail customers, 1m small businesses, 20,000 corporates in the UK." Simon says that because of this size, the firm can "take the best of a what a fintech would offer in terms of pace and agility, responding to what a customer tells us, but you can then do it in a way you can get scale very quickly and there’s a network effect there."
The bank offers services both for small businesses and individuals that drill down into data to over insights and services they hope customers will find useful. Barclays hope to end up with more engaged and happy customers, who feel they get something out of being with the bank.
The service for small firms is called Local Inisghts, and can give firms information about local economic activity that will help them improve.
"What you’re basically saying to a small business is ‘let us help you grow, because by understanding your business you can grow’" says Simon. The bank’s aim is that customers will grow, stay with Barclays , bringing in increased deposits and fees.
For individuals, there is the Smart Spend programme, which aims to reduce items such as utility bills by comparing what is paid by people of similar demographics.
"The average customer that’s done that [changed fuel bill] and we have a few hundred a month that go through that process, have saved an average of £260 a year," said Simon.
The product can also do things like giving customers money back on things they want, such as holidays booked through Expedia.
Simon said that people says "I want the bank to help me make sensible decisions about my life and my money. I don’t want my bank throwing stuff at me, i.e. making me impulse purchase," and this is what these products aim to do.
Barclays has also become the only bank to to sign up as an idap provider of identity for the Government, as part of the .gov.verify programme.
It is fairly obvious then that even the most prominent fintech firms would not yet have the capacity to do the all this, at the scale an institution like Barclays can. However, just three years ago, Barclays did not have the capacity either.
Simon said that historically the firm would have had to use a huge Oracle database, and "to process across all our small business customers on a daily bases it’s about six weeks work of processing data."
Six weeks is hardly useful for a small business under daily pressure to survive and trying to grow.
Things have changed now though, Simon explains, thanks to the increased processing speed, and reduced cost of a Hadoop stack.
"What we have done to do this now is we’ve started to implement 2m rows of data here. So that six week query in terms of why do this now versus why we couldn’t do this three years ago, we can now generate those insights for customers in about 21 minutes. We can run that overnight. Can tell something relevant to the customer every day."
It is a significant time shift that turns the data from something the bank holds onto, to something that can be of genuine use to a customer.
"There is a technology capability that exists now that didn’t exist two or three years ago that lets us do stuff that is timely, relevant and insightful for the customer," said Simon.
The kind of technology that is helping more and more data driven fintech firms to spring up is now allowing a big beast like Barclays to stay ahead of them too.
Is Simon worried about a big tech beast like Google coming into banking though, and would that pose Barclays with bigger challenges thank the Starlings, Atoms and Metro Banks of this world?
He is personally not convinced that Google would have any interest in taking on many of the burdens a traditional bank does, like carrying cash.
"It is more likely, like you see with Amazon, about being able to offer instalment credit, because you can make a 20-30 per cent return on that with the data you have, without necessarily having to open a branch," he said.
What’s clear from speaking to Simon is the environment around financial institutions is changing.
"Every startup bank, and most of the established players are mobilising to one degree or another around the opportunity" of data, he said
Regulatory changes have also prompted a shift. You look at things like the open bank working group which is this whole view that there is a democratisation of data, he said.
For Barclays it was also about internal learning how to be agile, said Simon: "We’ve done all of this agile, with a capital A in terms of software development. I.e heavily engage with customers, rapid prototyping, and actually by doing this in somewhat new frontier the bank can learn and the bank can be more agile in its core."
Customers are becoming more aware of the firms that hold their data, and are prepared to give it up that information for something in return.
Simon believes that banks now have to prove they are using that data in a way that is relevant to customers to engage with them and stay relevant, especially with fintechs coming up the outside to challenge them:
"To some extent if you think about a world where historically an advantage a bank had was about the data it held about customers, roll forward in a world where customers can choose who holds that data, who can see that data, what they want that data used for. Just the fact that we can as a bank hold data doesn’t actually make us relevant to the customer in the future. "
As with so many industries these days, the battle between old and new in financial services has data as its key weapon.
