Big Tech companies are becoming bigger, stickier players in the payments space, appealing to consumers with their pervasive, sleek interfaces and ease of use. However, these tech companies have also continued to lean heavily on banks to supply the very critical back-end payments infrastructure. Many banks have been forced into collaboration with Big Tech to help improve their bottom lines – and ultimately to survive. Examples include the “Pays” – Apple, Google, Amazon, AliPay, WeChat – and Google, Uber and others entering consumer banking. How will payments data be utilized?
But what do banks have that Big Tech wants? The answer is in the data, especially the payments data. The goal of Big Tech is to monetize data – to capture, orchestrate and squeeze every drop of value out of it. For example, Google recently revamped Google Pay to include additional features such as offers, cash-back, spending analysis and shopping in an effort to increase its appeal. Google says it uses the payment data of individual consumers to find offers and personalize your experience.
Big Tech relies on the virtuous cycle of data gravity; the more data you generate, the better understanding they have of customers’ needs and desires, creating greater attraction across the ecosystem. Big Tech views data as a valuable investment because they can quickly generate high financial returns.
Meanwhile, banks simply don’t fully appreciate the value of their payments data. Their approach to the massive amounts of data they hold remains disjointed. Payments data is sprawled across the organization in marketing, loyalty, fraud and credit risk silos. Many banks don’t even understand how to generate financial returns from their payments data. Instead, they view data as a cost to be managed rather than a valuable resource to draw insights from.
For financial services organizations to avoid being boxed into a low-margin corner, they need to balance collaboration with Big Tech together with their own initiatives to find their most accretive position in the new smart ecosystem, leveraging their unique advantages to stay competitive. Banks must not rely solely on Big Tech to reap the rewards from the payments data that bolsters their own businesses.
A few ways that banks can leverage into their own plentiful data resources and kickstart a data-first mindset include:
- Lean into the data gravity effect: Taking a page out of Big Tech’s playbook, banks must change their data mindset and start the cycle of data gravity within their own organizations. Banks may continue to fragment payments data and undertake small-scale digitization projects with limited data sets, just to start thinking in this mode. However, to win, banks must rapidly orchestrate all types of payments data across the whole organization and make it all available for enterprise-level analysis and decision-making.
- Implement a data strategy: Banks must have a data strategy to compete with big tech, who are ahead in driving value from data. Data strategy is extremely complex and also requires organizational change. Activating a successful enterprise-wide data strategy requires a three-pronged approach. First, banks must have a vision and roadmap of what they need to achieve with their payments data. The roadmap is supported by the second step – building data governance that transforms payments data from isolated elements scattered throughout the organization into actionable, reusable enterprise assets. Lastly, they need to encourage a culture of data analytics-driven innovation throughout the entire organization that breeds trust and confidence. Operationalized at scale, this strategy will transform insights into beneficial outcomes. Following these steps will position payments players for the future – they will make real-time decisions to tailor customer experiences and use hyper-personalization to more precisely target offers for digital payment products and features. Having a comprehensive view of all the payments data is the foundation the future of digital payments.
Traditional banks must shift thinking and focus on digital payments transformation to activate their competitive differentiation strategies. They also must realize the value they bring when partnering with Big Tech and adjust their strategy and mindset to rise above the competition.