The financial sector has always been a wealth of data. As the value of data is rising, it leaves the banks and financial institutions with the question: What value can we achieve through a more commercial approach to data?
Data is the new oil. You have probably heard this so many times that it’s starting to become cliché. But it’s an undeniable fact that the most valuable companies are no longer oil companies – it’s the tech-giants who skillfully drill and refine data.
“The development in use of data has gotten the Israeli historian Yuval Noah Harari to appoint dataism as a new, fast-growing religion. A dataist swears to the authority of data and sees the universe as one massive data stream, where organisms are reduced to biochemical algorithms. A new religion, where Silicon Valley is Bethlehem,” Tobias Holger Hansen, Chief Legal Officer in the Danish scaleup Cardlay, says.
The financial sector is one industry with access to a massive amount of customer data, and with the mindset of a dataist it has the potential to create value for both customers and the sector itself.
Every credit card is essentially a software code that leaves data behind, which no one but your bank can access. But despite other industries looking enviously at the amount of data they hold, banks traditionally haven’t used it commercially.
Fintech could help banks refine
“Fintechs are entering the market with new ways to use data better and smarter. I’m certain this is one of the arenas where banks will compete in the future,” Hansen says.
Cardlay is a good example of this statement. Cardlay has developed a white label product for banks and card issuers that offers a high level of data enrichment for card transactions. By using machine learning and intelligent solutions for enriching the data, there is a great potential for bringing transaction data to life and developing new products. Cardlay sells it to the banks, who sell it to their own corporate customers.
Cardlay have used this data to build a service that helps companies get VAT refunds across country borders in the EU. This is an opportunity only few takes advantage of today, either because the process is rigorous – or simply because they don’t know about it.
“By asking two questions we can extract the data we need to automate the refund on the customer’s behalf. Money they wouldn’t otherwise have gotten. And it’s possible because we enrich the transaction data, which is already available,” he says.
The future of banks is all about data
“More and more companies are making solutions based on bank data alone. If I have access to your most recent 100 transactions, there is a huge probability I can predict transaction number 101. This can benefit the customer: If a bank knows you are most likely going to buy milk next, it can provide you with some offers on milk in your neighboorhood,” Hansen says.
There is a lot of customer-facing examples for data such as this, but data can also be used to improve the banks’ internal processes – e.g. onboarding or fighting money laundering.
“When you first start accessing the data, it’s like opening Pandora’s box. And we’re currently starting to see the first products offering a smarter solution thanks to data,” he says.
This development might change the role of a bank in the coming decades. They might become more of an infrastructure provider that fintechs build services on top of, which will make everyone’s everyday life easier by predicting patterns through data.
“Banks have already demonstrated how skilled they are at handling peoples money. Now banks have to show that they are capable of handling customer data in the same secure way. If that’s the case, banks are well equipped for a future with data-capitalism.”