Who utilizes customer data better, banks or fintechs?

Customer data and the opportunities for creating innovative business models out of it has become a recent favorite topic of mine.

I spoke on the topic at FinTechStage Luxembourg’s dinner overview hosted by Luxembourg for Finance and the Luxembourg Ministry of Finance, and we had an audience of banking CEOs and fintech influencers keen to find out more about the power of data in solving universal financial services problems.

Banks and fintechs have unique ways of dealing with the collection and analysis of customer data, then building offers and revenue models on top of, ending with the disbursement of data-based offers back to the customer. When looking at this entire data value chain, there are two aspects that affect the quality of the ‘building’ and disbursement of data-based models.

Data and transaction volumes: the more customers, the more data, thus better quality of data-based output.
Number of data points: banks tend to use more obvious data points when storing and building on customer data. Fintechs, as is well known, use more ‘cool’ data points such as Facebook friends.
Rules of analysis: the quality of analysis and the number of built-in rules will determine the level of innovation in the offers and customer experience given to end-consumers.

Banks have the advantage of volume

Banks already hold massive amounts of customer data, and more importantly have already invested in huge amounts of data infrastructure to handle all of the transaction and customer information. They can play around with it, try out any number of new and innovative models on it, and are well placed to find best-experience use cases for customer data.

However, the most unique aspect of customer data at a bank is that it’s regulated at every aspect of the data value chain. There’s no clear inference on whether this is an advantage or a disadvantage, and could be either depending on the use case. Yet, the fact that every customer’s information is mandatorily collected as per local KYC rules ensures that there’s a minimal level of data point analysis viability for every customer acquired.

Challenger banks have been very clear with the message that data is as powerful as money (if not more so) in the way banks’ offerings will be made. Secco Bank and Almond Bank are two examples of those using a data-based API model to give the power back to the customer.

Traditional banks have already started looking at innovating around data. Some of them partner with fintech firms to obtain nontraditional data such as social media or biometric data points, and others adopt technologies to make existing processes such as KYC easier.
Fintechs have the advantage of quick innovation

Fintechs are, of course, the ones that brought the idea of innovation to customer data owners. New data points such as Facebook likes and Twitter followers were discovered and added to decision-making models around lending and risk. The quality of a social circle was given the same amount of importance as an indicator of credit risk as the amount of savings.

Fintech firms such as Trulioo have created massive global databases, enabling search for personal data across regions the big banks hadn’t previously considered. First-of-its-kind databases for rural African regions ensured new challenger banks or payments services launch quickly and meet local KYC requirements. They are building niche databases with global appeal.

New, cloud-based data-sharing models emerged. Despite countries such as Luxembourg struggling with data location and privacy regulations (that are set to change in the near future), there’s a high appetite for cloud-based infrastructure and the ability to share data with multiple banking and technology partners. Big data fintechs such as 1010Data (a cloud-based platform for big data discovery and data sharing) and Xignite (a platform that provides market data APIs) have begun to enable this change.


fintech-innovation-new-data-business-modelsThere’s no singular winner. Of course there isn’t. Every blog I write these days seems to end with the same message: banks and fintechs ought to work with each other; banks have the advantage of scale and fintechs have the advantage of agility. There are huge gaps in creating a seamless customer experience across multiple digital channels and data paths, as well as in creating products and bundles that the customer has a high desire for. We need to reach a stage where we start providing the services that the customer doesn’t even know he wants yet.


Matthias Kroener, CEO of Fidor Bank, mentioned in our panel discussion at FinTechStage that the sign of a good customer experience is when the service provider gradually becomes invisible. By partnering with fintechs and creating joint data-based offerings, customers need not know the difference between a bank and a technology company. What should ultimately matter is that they get the experience and offers that matter to them.

My slides from the presentation: