Following the Age of Reason in 2017, the 2018 France Fintech event taking place on 10 April in Paris – with which L'Atelier BNP Paribas partnered for the third year running – was entitled Fintech Revolution, with a central focus on the new moves to free up personal data and make it deliverable. Judging by the popularity of recent animated films, the digital future looks very bright indeed. However, the new thinking about data has little to do with the fairy tale world. Instead it is taking place among the world’s major banks, regulators, politicians and the digital giants, plus also among the smaller fry that also have great promise – i.e. the FinTech specialists. Nowadays all players involved are in pursuit of data that will help them find the holy grail – a superb Customer Experience – so that in the not-too-distant future it will no longer be all about selling a financial service but providing an experience – personalised, transparent, fast and straightforward, even, in more forward-looking mode, an emotional experience that will enable customers to live their dreams and carry through their plans and projects.
Freed-up data: thanks to whom or what?
A number of things have happened to free up data. First of all, the boom in data-driven technologies, including Artificial Intelligence; Blockchain technology, which is already seeing its first applications, and the Internet of Things. The banking and insurance sectors are now making increasing use of these, helping to create new services and uses for customers.
Secondly regulation – especially two recent pieces of European Union legislation – has played a key role. Axelle Lemaire, France’s former Secretary of State responsible for Digital Technology, who took to the stage at Fintech Revolution, put it in no uncertain terms: “We’re at a moment in our history when Regulation meets Innovation. And today this is no longer an obstacle; it’s a competitive advantage.” The rules governing financial services are designed to boost competition, with the aim of promoting innovation, facilitating the creation of new high-quality services, and encouraging the emergence of new players. For example, the second EU Payment Services Directive (PSD2) allows providers of payment services and other banking aggregators such as Bankin' to access a customer’s bank account with his/her agreement. In addition to helping customers to manage their budget and spending on a daily basis by being able to make a direct comparison of all their accounts in the same place, Bankin’ enables them to make payments through its payment transfer functionality. Meanwhile, Linxo recently announced that it had acquired Fintech firm Sharepay, thus underlining its ambition to drive ahead in the payments sector. However, Bankin’ CEO Joan Burkovic is not totally convinced of the efficacity of PSD2, given that it only applies to current accounts – from which payments are made – and not to savings accounts, which in fact enjoy the lion’s share of the banking market.
GDPR: data portability rights
As with PSD2, the General Data Protection Regulation (GDPR) highlights the principle that data belongs first and foremost to the subject of that data – i.e. to the customer of a company or bank. The GDPR, which comes into force on 25 May, introduces a right of data portability. The Regulation recognises customers as being the rightful owners of their personal data, who are therefore entitled to obtain or transfer their data, or demand that it be deleted. If it were not previously absolutely clear that personal data is a precious asset, which should be protected, the the recent Cambridge Analytica scandal has brought this fact into sharp focus. Discussing this sensitive subject, French scientist and entrepreneur Aurélie Jean wonders about how data should be deleted. “Do they remove it from the memory by putting in random data, or do they take it out of the memory by destroying the digital pathway, the address used to access them? In the latter case, the data will still actually be there,” she points out.
FINTECH companies in 2017
Last but not least there is the phenomenal rise of the Fintech companies, which received a total of $31 billion worth of investment in 2017, up from $25 billion in 2016, according to a KMPG report entitled ‘The Pulse of Fintech’. These companies have brought about new ways of doing things with their new financial service models. Little by little, they have created for themselves a place in the sun in the banking industry, whether in payments (PayPal on the Internet and Lydia via your smartphone); bank account management (Qonto for companies and freelancers, and in the near future Margo Bank for smaller businesses); loans (Lendix for small and medium-sized companies and Younited Credit for households); savings management (the Advize and Yomoni robo-advisors); and budget management (account aggregators such as Linxo and Bankin').
The battle for data
GAFA & BATX
Fintech firms have been providing banking services for ten years now. More recently however, the US and Chinese tech giants, plus other major players, whether in the retail business – French companies Fnac and Carrefour – or telecom – Orange – have also been looking to grab a share of the banking cake. And they have huge competitive advantages that can help them to obtain it. In addition to their extensive financial assets, they are not only sitting on colossal reserves of data from their customer base – just like the banks – but they are adept at exploiting that data so as to draw value from it.
For example, players such as Apple, Google and Samsung have set up their own mobile payment services. In the retail sector, companies such as Fnac and Carrefour have also launched their own payment cards, not forgetting Amazon which, in addition to providing Visa cards to its US customers, is now working on a special banking offering aimed at Millennials. Even airlines are getting in on the act: Air Asia recently launched a payment transfer and loan offering in Asia, entitled BigPay. Nor are telecoms companies standing aloof, as seen with Orange’s move to launch a mobile banking platform called Orange Bank.
L'Atelier BNP Paribas
“The role of Fintech has changed. Yesterday adversarial, today third party as a product manufacturer. Banks won't produce their own product, they will rely on a third party to do so.”
In their attempt to face up to the digital giants, Fintech companies have now become valuable allies for banks. This is the vision of John Egan, Head of L'Atelier BNP Paribas: "The role of Fintech has changed. Yesterday adversarial, today third party as a product manufacturer. Banks won't produce their own product, they will rely on a third party to do so." Fintech companies, which are adept at exploiting data and extracting value from it, could well provide solutions to three pain points in the customer relationship which banks have difficulty dealing with: personalisation, transparency, and efficiency. This was the topic of a panel debate at the France Fintech event moderated by Patrice Bernard entitled: ‘How can data re-invent the financial services business model?’ During the discussion, Clément Coeurdeuil, CEO of Budget Insight, the leader in banking data aggregation in France, drew attention to an apparent contradiction. “Basically, some people might think that my job is simply to sell banks the data they already have. However, given their ageing information systems (IS) and software [...], it’s difficult for them to extract clean, usable data. Moreover, as far as the data is concerned, banks are wondering whether they have the right to so do while we’re asking ourselves whether we’re really going to create value for customers. The real issue for us is to figure out what kind of customer experience we’re going to create, while banks – because of security and compliance issues – turn this question on its head,” he pointed out. Nevertheless, it is quite obvious that banks are really looking to protect their most precious asset – trust.
After the Budget Insight data extraction specialist had shared his views, it was the turn of the data exploitation expert. Charles de Gastines, CEO of Paylead, who profiles his company as the French Fintech that wants to revolutionise knowledge of the customer by revealing the full potential of banking transaction data, stressed: “Everyone talks about data, AI, Big Data, but the fact is that banks have very powerful transaction data that they’re not exploiting. And since they need to move fast if they wish to face up to the US and Chinese tech giants, we enable them to go much faster because we have much smaller and more agile teams and our work is slightly less regulated.”
To the question of how banks’ business models might be impacted by data, the response was clear. John Egan, CEO of L'Atelier BNP Paribas, foresaw that “banks will become managers of people’s data”. This prediction was seconded a short time later by Clément Coeurdeuil. “Banks are now in an era of transformation unlike any they’ve been through in the past. This is no longer a security business, it’s a data business,” he argued.
The last speaker of this panel session, Jonathan Hescovici, CEO of WeSave, an online wealth management platform targeting end-customers, shared his vision of the future business model for financial services. “What will be important in the coming years will be to tap into customer emotion. Our job is to make our customers’ money work for them, but that’s only the means. We need to concentrate on the ends rather than the means,” he told the audience.
Going forward, the challenge for banks will no longer be to sell products, but to sell experiences
In addition to the transaction aspect, the bank of the future will need to move forward on the relationship and emotional fronts. Going forward, the challenge for banks will no longer be to sell products, but to sell experiences: buying real estate, financing children’s studies, paying for a wedding, and so on. And that is where the future of banking could be: becoming the customer’s lifetime companion through a strategy of drawing on data, augmented by collaboration with Fintech companies.
Taking a horizontal view
Scientist and entrepreneur
We need diversification in the world of digital tool designers. This shouldn’t be the exclusive province of software developers.
Given that data feeds and trains artificial intelligence (AI) systems and that machine learning and deep learning techniques are set to play an important role in the field of customer relationships, extreme vigilance will be required in order to guard against technological bias. During a panel session entitled ‘Has AI already been incorporated into Fintech company business models?’, Aurélie Jean, a scientist and entrepreneur, reminded her audience of the importance of representative data. “Taking the example of trying to work out the price of an insurance policy, if you train the algorithms only on data from policyholders in past decades, you will inevitably reproduce the biases of the past regarding gender, social background and ethnic origins.” This is why in the United States, an Afro-American pays three times the price for his/her car insurance than a white person. With machine learning, algorithms are trained on data that human beings have chosen. If the data is unrepresentative, the algorithmic models built upon it will also be unrepresentative. Aurélie Jean is firmly convinced that “the separation of philosophy from science which dates from the middle of the 20th century is a mistake. Data scientists should look at data with both a scientific and anthropological eye. An algorithmic model will always provide an answer. The real challenge is to take a step back from the answer you get and use it as a basis for more human consideration. It’s vital to look at things from an anthropological viewpoint: understanding aspects of civilisation, culture, history, and so on. We need diversification in the world of digital tool designers. This shouldn’t be the exclusive province of software developers,” she told the event audience.
Thus, like a raw diamond whose brilliance and purity one would like to reveal without having to break it apart in order to do so, data will be passed along from one craftsman to another with complementary skills. Some experts will know how to prospect for it and mine it, others how to make it shine, and yet others how to manage and safeguard it – all for the benefit of the end-customers, their projects and their dreams. In this way the financial experience could well become more of an emotional relationship!