Market Watch Personal Finance

Impact of free data on bank’s model (Part 1)

Banks should look at all what’s happening to mainstream media to see their future

Information is now a product of mass consumption

Whether it is considered a good thing or not, it is a fact that the media industry is undergoing one of the most important transformation since its creation. New technologies and their associated behavioral changes have completely changed the way media and information are consumed. One of the key changes is that content has been freed from its media support. Through RSS, Twitter or blogs, an article can now be found and read outside of the newspaper format, as well as its affiliated Web format. New actors have found niches, either by aggregating the maximum number of news information (roughly the model followed by Web sites such as the Huffington Post), “curating” it (roughly the model followed by Web sites such as The Daily Beast) or letting users define their own sources (Google Reader for example). Users have found a new way to consume and compare information.

A far cry from the Banking industry? Not so much.

Banks have also, perhaps without even realizing it, launched their own revolution. By allowing their clients to access their banking information outside of the traditional paper statement or proprietary Web banking portal, they have created a new space for innovative companies providing personal finance services to people. Web sites such as, or QuickBook (Intuit) and Money (now discarded) are answering the most important need for the client of a bank: answering the question “how I am doing financially. And these content providers”data curators” are doing it better than traditional bank Web portals. Here are some explanations for that diagnosis:

These data curators can aggregate information from multiple banks and services. For a customer, having multiple accounts and multiple services in different banks has become a clear trend is the last years. Reconciling several paper statements and Web banking portal information is a hurdle that would hinder most people from managing their money. While some banks start offering the possibility to import information from other banks into their own platform, it raises important questions about confidentiality.

These data curators are not selling product and helping you manage your money at the same time. On the other hand, banks have for long capitalized on the fact that their clients are captive to push products and offerings to them. And while their products might not be the best, the apparent ease of managing them all in the same place has played an important part in convincing clients to choose them. Perhaps customers could spare money somewhere else, but the barrier to exit that managing several banking relationships represent is important.

These data curators can help you choose what offers would be best for you. By identifying trends in your spending, number of trades per month, interest paid, they can help you find products that would best match your needs. Why pay for a credit card with a $10,000 limit when your average use is $1,500 per month ? Why choose a trading account with no fee above 20 trades when you on only trade five times on average per month ? A key aspect for lies in their capacity to merge financial data coming from different bank accounts and investments to better establish those trends and have a global view of one’s financial assets as a whole, which leads to more relevant product recommendations. This clearly adds value to users. (to be continued…)

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