Market Watch Personal Finance

Impact of free data on bank’s model (Part 2)

What is the impact?

Banks have seen a decrease of their customers’ engagement. The role of bank branches has diminished with the introduction of intelligent ATMs and Internet portals. And while they have increased their positioning in terms of mobile and internet banking, cross selling may become more difficult in this new environment.

With the increasing use of services such as, banks will also see a decrease in interactions between their customers and their Internet and mobile platforms. Why use several Web sites when you can see all of your assets on a single graph and track down in details all your banking fees? When it even warns you of credit card payments to be made? For example, tells you every time your bank takes fees on your account. Where they once were lost in statements in the past, they are now clearly brought to your attention.

Additionally, banks will face tougher competition through the comparison engines offered by these new platforms. Why consider an offer by your main bank when the “Ways to Save” page on Mint shows you offers from 10 banks (and calculates the costs and saving involved)? Customers might lose their connection with their banks and switch between products more easily because they will be empowered to compare them based on their needs. On one side, it could reduce the costs for of customer care for banks, as they would need to invest less money per customers on their Web sites, call centers and branches. For some population of users, clear gain will be made. But banks will also face tougher competition on pricing and find cross selling much more difficult to perform. Client loyalty will also be negatively affected.

What is the future for banks?

Banks need to realize that, just like the media industry, they are and will be facing a groundbreaking change of their industry in the near future. While the negative aspects may seem important, this new environment is also a fruitful ground for them to create new strategies for their portfolio of brands and activities. We have identified two possible options for this new environment:

–         The Ryan Air strategy: Embracing the fact that there is no gain to be made in maintaining branches and even Web-based platforms, banks can decide to become pure price players. By reducing all front-office costs and streamlining their operations, they will be able to sell low price products through aggressive marketing tactics. By embracing the recommendation engines of these new players they will compete to be at the top of the list on each offer. This scenario especially concerns “commodities” products such as checking and saving accounts, credit cards, term deposits, credit accounts…

–         The Niche Strategy. Just like several blogs following a niche strategy on information have found their way onto the new media landscape, some banks will opt to address the specific needs of certain populations and create new and innovative services for them. This is especially relevant for complex investment strategies or products. Close to Private Banking, they would win their clients by strong relationship management, dedicated interpersonal relationship and financial knowledge.

As seen above, a new environment means new opportunities and those can be seen as part of a portfolio of brands positioned differently.



The Internet is still a young technology, but it has already extraordinarily impacted the way people live and consume. While the changes described above can be extrapolated from the current trend in technology, banks should also be aware that new and disruptive technology is appearing all the time. They have a strong interest in investing in monitoring how it could impact their business model. Social media, for example, is a key trend that has not impacted the banking industry massively so far, but could be in the future with the development of payment platforms. Being ahead of the curve will separate the winners and losers of this new landscape.

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