As one guide to the future, the past tells us that the successful bank of 2030 will have continued to innovate on product and process, but I’d like to consider a new avenue for success – innovating on the ‘promise’ of a bank. Re-imagined in the context of a data economy, the historic proposition of “trust and safety” could give banks a distinctive competitive advantage as more effective data economy custodians and brokers.
There is no doubt that COVID-19 has contributed to a great leap in digitisation. The shift to online sales and service has accelerated (Australian sales have almost doubled as a percent of total sales), particularly across traditional laggard categories (e.g. groceries, medicine) and segments (e.g. elderly). Further, there has been an increase in the ‘knitting together’ of digital and physical experiences - be it in check-in, order and pay at table in hospitality, kerbside pickup for retailers, to virtual events and concerts. In the US, approx. 75 per cent of consumers have practiced some new online shopping behaviour, and, 80 per cent intend to continue it post pandemic (McKinsey).
Continued digitisation of the economy will also create an increasing diversity and depth of new data – and for the bank of 2030, while digitisation will be table-stakes, the utilisation of new data could be an interesting source of differentiation in 2030. When I say ‘utilisation’ this could be reflected in a range of business models, be it: keeping data safe and secure, or accumulating and interpreting data to provide a compelling experience, service, content or marketplace, or by ensuring it can conveniently authenticate and streamline consent and activity. All of these models involve some degree of ‘custody’ and ‘brokering’ of data to third parties, or within that company’s own ecosystem.
Today, three entities capture people’s data at scale: government, global tech and banks. The question for 2030: who can most effectively utilise this data over the long-term?
Governments capture and generate significant data, but in liberal democracies, citizens and governments themselves are wary of their role in collecting and utilising data beyond core services. The Australian Government prefers to influence the use of data through policies like the Consumer Data Right and by selective use of direct interventions as enablers or market signals (eg, Energy Switch NSW). In the narrower scope of areas where a government has an indisputable role to play – e.g. health and security – there are wonderful examples of governments transforming through models of open data and open governance: the Taiwanese response to COVID-19 is perhaps the most remarkable.
Global technology is in the box seat of the data economy. Their business models are built around data capture and utilisation, and their patient capital (and cash reserves) allows them to subsidise a growing array of physical devices and vertical services, which in turn capture more data. Regulation and consumer sentiment are the head-winds. While COVID has further entrenched their dominance in the economy, the ‘techlash’ will grow. At a national level, governments and consumers are increasingly vocal about the lack of competition, tax leakage and division enabled by social platforms. At an international level, it’s also interesting to consider that by 2030 there might be a ‘balkanised’ technology map as the US, EU and China continue to diverge in their policy postures, and adopt protectionism against foreign platforms - most recently reflected in the mooted de-merger of TikTok.
So, to banks. Banks are arguably in better shape to respond to rising consumer and government concerns about data capture and usage.