To be attributed to Ramzi Yakob, Chief Product Officer at Upside Saving
Open Banking is an opportunity to look at your marketing approach with fresh eyes. Specifically, the eyes that come with access to first-party consented data that demonstrate actual human behaviours. Rather than getting lost in the mire of survey-driven, claimed behaviour or, even worse, the fraud-ridden world of programmatic marketing.
Allow me to indulge a moment on the hazards of third-party data in particular. The quality of the data is so poor that using it to power targeted programmatic marketing based on the single characteristic of gender is less accurate than using no targeting whatsoever. Good luck with any targeting that attempts to be more sophisticated than that. You may as well throw a dart at a wall, backwards while wearing a blindfold.
The amount of insight available from Open Banking data is eye-watering. For now, I’ll highlight three specific use-cases available to marketers today:
Finding new customers – Banking transactions clearly indicate if someone is currently an active customer, used to be an active customer or hasn’t shopped with you at all in the last 2-3 years. For those that don’t shop with you, there’s insight into whether they simply aren’t active in your category or if they’re incredibly loyal to competitors.
Finding lapsed customers – For people that have lapsed, you can see if they were a heavy buyer or not and how much they might be worth to you again if you were able to win them back. You can also spot patterns in behaviour that might be predictive of customers lapsing, to design specific tactics to defend against churn accordingly.
Finding high value customers with room to grow – While you might think that someone who spends £20 each month with you is a great customer, what you don’t know is that they spend £100 each month in your category and there’s a lot of headroom to take share of wallet. Right next to them is another person that spends £20 each month with you but that’s all they spend in the category. Just using your POS (point of sale) or internal loyalty program data won’t let you know which is which, but with Open Banking data you can develop appropriate strategies for each to maximise profit.
We’re only just scratching the surface today, and there are some steep challenges for retailers to overcome to really stretch the potential that Open Banking offers:
Consumer adoption of Open Banking is still nascent with only about 2.5m UK adults having engaged with it so far. Giving anyone such deep access to your banking data is a huge ask; the value exchange to consumers has to be worth it. I believe that a large part of the low levels of consumer engagement with Open Banking to date is a result of very poor value being offered in return. However, I’m confident that adoption will ramp up rapidly over the coming years as more and more businesses offer propositions that make it worth their while.
Getting into Open Banking is a commitment. Aside from increasing your exposure to GDPR, dealing with raw Open Banking data means you also need to be regulated by the Financial Conduct Authority (FCA). Once you get past those hurdles, the data itself is largely worthless in its raw form. You’ll need a non-trivial amount of Data Science expertise in your organisation to clean up the data and categorise it in a way that’s useful. This is before you even get into the fun part of training machine learning models to go hunt down the actionable insights such as the use cases mentioned above.
Staying on the right side of the Competition and Markets Authority (CMA) will be hard. Imagine Tesco having a perfect view of how much their customers are spending at every other supermarket, how often, where and when. Getting into this space directly would give you access to information that the CMA might view as being anti-competitive.
The challenges might make Open Banking feel like a poisoned chalice. The good news is it doesn’t have to be. Enjoying many of the benefits without suffering any of the pain comes down to smart strategic partnerships with businesses that offer all of this as a service, while offering consumers great value in exchange for granting first-party consent to access this data. As the wider tech industry moves towards killing cookies and the quality of third-party tracking data continues to decline, it’s time to start investing in what’s next for marketing success and delighting customers that will ultimately drive profits and growth.