Throughout the years, discussions on financial services have centred on different priorities: at times it has been promoting savings; at others it has been all about how to optimise credit. Now the concept which leads in financial services and payments discussions is the use of data. The technological revolution that has taken us from a paper-based to a digital world in just a few decades has come to fruition with an explosion of the availability of data. The question we now have is, how do we use it?
What is ‘data’ and what value does it give a business? In terms of payments, data is the
details of everything that a consumer has spent money on – when, where, how often and using what type of payment. Put all this information together and you will probably get to know that person quite well. You will then be able to determine trends in spending habits, know what goods, services, financial products the consumer is likely to want in the future and offer products and services accordingly. Data is knowledge and knowledge, as they say, is power.
As Mark Carney, the Governor of the Bank of England, pointed out in a recent speech, the way banks have always been able to serve their customers best is by simply getting to know them. That, traditionally, was the job of a local bank manager. But social and economic changes – shifts in working patterns, increased mobility, digitalisation, the growth of online banking – have led to bank branch closures, the outsourcing of services and, unintentionally, to the distancing of the customer from their financial service provider. Now the pendulum has begun to swing the other way and providers are recognising that it is in meeting the needs of customers as individuals that they will attract business and deliver true value. And it is data, or rather, the ability to unlock insights from data and to use it to make customer-centric business decisions, that will allow this.
The Open Banking initiative, driven by the Competition and Market Authority’s Decision of August 2016, is enabling the data-driven evolution of the payments industry by changing the way retail banking operates: it mandates banks to open up their vaults of data and let non-banking businesses use it in creative ways to create the more personalised services customers want. The data can be shared using open APIs – the computerised system of communication which lets, for example, Uber, speak to Google maps and to your credit card in a way which makes finding you, sending a car and paying for your journey all part of the same seamless process.
Couple this with the Payments Services Directive 2, due to be implemented by January 2018, and you have possibilities for payments which have never before existed. New non-bank providers will be able, at the customer’s request, to make a payment straight from bank to bank in real-time. Comparison websites will be able to use spending history to find the best savings, insurance and mortgage products for each person. Budgeting apps will help each of us take control of our bills, savings and spending.
With these developments just around the corner, the industry needs to examine how data-driven technologies today, and in the future, will enable payment service providers to offer customers exactly the services they want whenever, wherever, however they need them. It is also important that the industry brings customers on this data journey with the payments industry; addressing data privacy and security concerns and how best to communicate the user benefits. The financial services and payments industries will only be able to make full use of data if customers are willing to share it and a culture of trust and confidence is developed between customers and industry.
On 22 March, techUK is teaming up with Payments UK to host a conference focussing on all these issues, with presentations from experts, audience discussion and real-time demonstrations, We hope you can join us for a trip to the future of payments and see how consumers and businesses alike will benefit from ‘Unlocking the Power of Data’.