Don't Touch My Data: Design Drivers For Data Services In Banking

Fabien Fedy at UXDX Community: Helsinki. Video: https://www.youtube.com/watch?v=WklkjSp4dQc

Readable transcript: edited from the recording's captions for readability (fillers and false starts removed, punctuation and section headings added). Wording is the speaker's own. Timestamps are positions in the video. Names marked [?] could not be verified against the audio.

Who I am and where this story starts

[00:00:09] All right, hello everyone. My name is Fabien and today I'm going to present to you on the "don't touch my data" topic. I'm a business designer working for Nordea. I started working there a couple of years ago. My background is more into startups. I worked many years in UX design, business development, service design for different corporations and industries, and my skill set is more about UX research, prototyping, service design. And as you see on the viability side, that's why I call myself a business designer. I'm doing nowadays a lot more business modeling, value proposition design, for Nordea in transaction banking.

[00:00:55] So I'm not going to tell you today where my lovely accent comes from, but I'm sure you will figure it out soon. But before I move into my talk, I think every good story starts somewhere, and my personal stories most often start there, in Paris. So it was in 2016 actually, and I was in Paris and my wife was based in Finland. I was chatting with my wife over SMS, and then I saw something weird on her profile. I looked and I saw an announcement that my wife is actually dead, on her Facebook profile. Okay, it's not exactly the same announcement, but I was quite astonished and surprised. I was wondering, with whom am I actually chatting? Is it a bot, a chatbot, or is it a ghost? So I was not really sure what it means.

[00:02:07] So of course I called my wife straight away to inform her what had happened, and started googling, and I found out that Facebook had actually, for a specific period of time, made an announcement on people's Facebook profiles that they were dead. So it was kind of a huge backlash, and for me, for Facebook it was just a super message, but for me somehow I felt, do I trust those guys with my data, and how they handle my data? Just out of curiosity, how many people really trust companies that they handle responsibly their personal data? Please stand up. You trust? No. That's what I thought, that's what I thought.

Where banks come into this

[00:03:01] And of course two years later the Cambridge Analytica scandal came out, releasing millions of user data from Facebook profiles that had been harvested for political purposes. And we all knew what happened with Facebook and social media in general. So where do banks come into this? I work for Nordea, and when you think about it, banks have not always had the best reputation on the market since the financial crisis, but there is one thing that especially in the Nordics banks still have, which is trust that their financial data is actually protected.

[00:03:42] So when you think about how much data we are processing, there's not only the personal or the financial data, there is a huge opportunity for banks to create new services based on data. And in the past couple of years I've been shaping new services for Nordea which are based on the transaction data in a very different range of contexts, and during this time I came up with this. And one other thing is that in the Nordics there are very different aspects which make it a very good playground for banks and fintechs in general to become front-runners in data-driven services.

[00:04:24] And of course there is European legislation, the GDPR, the PSD2, but there are things which are more specific to the Nordic countries, such as the availability of public APIs, the digitalization of receipts, open banking which is pretty much advanced in the Nordics, of course new technologies, front-runner like 5G, and last but not least the cashless society. Because I lived almost ten years in Germany and paid half of my purchases in cash, so it did not really enable this type of service, whereas in the Nordics there is not much cash available anymore.

The four guiding principles

[00:05:03] So during my work I was thinking about what are the key guiding principles to design data-driven services in the banking context, and I would give you a short overview on each of them with some concrete examples. The first one is maximize the value for the users. Everything starts with, you can use data, but it needs to make sense from the user perspective. How could you make valuable insights and actionable insights from this data?

[00:05:44] But in a way it's quite important to rethink as well business models in banking, to understand how do we actually use the data. And while doing it you need to ensure full transparency to the users. And there are as well other opportunities to create new business models out of data, which would help you to think sustainability, and how to use the data for a greater purpose. And last but not least, and I will finish my talk with this, don't forget to explore new grounds. There are things that you wouldn't think about which are great opportunities for banks at the moment.

Maximizing value for users

[00:06:25] So let's start with maximizing value. We all know that, I worked in fintech before and seen very different types of startups working on this. So how do you maximize value, how do you create concrete insights for users? Of course we started with what most banks start with, which is how to get a daily, weekly and monthly overview on what I spent. So it's pretty much standard in the banking industry. The problem what I see here is that with this process, every financial player is doing it, some are doing it better than others, but it doesn't create a real competitive advantage for banks. So we definitely need to go beyond this.

[00:07:06] And when you think about it, the overview of our spending is pretty much basic when you think about what other companies are doing out of data. So we need to go much deeper, we need to personalize our service, and to move into: how well do I manage my finances, how do I make this data actionable, and how do I compare with others? Like benchmarking your data with your neighbors, that has proved to have a very good impact. For instance we could say, how much do people spend on electricity within your area? That is the type of data which means that comparing your data with people around you would help you to make this data actionable and make some change in your spending patterns.

[00:07:50] And last but not least, how do I fulfill my dreams financially? Everyone has different dreams and different ways to perceive finance. So these are the things that we are working on. And there is one partner, of course, we have within our team where we are developing the Nordea Wallet, which is tracking your spending, and we are now partnering with Subaio[?], which is a startup and we have invested as well in them, which optimizes users' spending by tracking all types of subscriptions that you have. So it's very easy for people to subscribe to new services, Netflix, but many people don't really keep track of how many subscriptions or how much money they spend on a monthly basis. So this has been very successful and we really believe that we should move towards this and create new types of services of this sort.

Rethinking the business model

[00:08:43] But as I said before, when I started working with a bank, the basic revenue model that we have within the bank hasn't changed for four decades. It's really based on consumer finance, on transactions. And in my opinion we cannot really create sustainable services if we don't reinvent our business models. So new opportunities out there: as we all know, all the tech giants have made billions of euros out of facilitating the exchange of value between two different customer segments. So how can a bank become more of a platform business model and facilitate the value exchange between, for instance, merchants and their customers?

[00:09:39] And so there are many different types of partnerships where we could include the collaboration with different merchants to create a win-win situation. So another example is based on saving. How can I achieve my goals financially? Okay, for instance you want to save for a road trip next year in the US, so we could have a partnership with an airline where the airline is supporting their customers to achieve their dream and go on the trip to the US. And then of course, how can I spend smarter? That means identifying patterns in the data to help people to spend money smarter and save money on a daily basis.

[00:10:26] So this type of new business models will force us to actually rethink our value offering. And we should think about it because before, we created services for our customers to support the basic business model, but now we are in the process where we start thinking of new types of service and saying, should we offer bank-agnostic services? So when we reinvent a new business model, we don't think about only Nordea's customers, we think about, if this really provides value, why don't we offer this type of service as well to other banks' customers, which is the next step in the evolution.

[00:11:04] And I think when you look at MobilePay and different types of services which are going in this direction, we brand new services and offer them to a wide range of banks' customers. And this is one example, of Transaction Connect, which is a startup which turns any payment card into a loyalty card. It's a French startup actually, and they are entering the Nordic market, and we are creating as well services which somehow facilitate the value exchange between merchants and their customers.

Full transparency, including on how we make money

[00:11:42] But while doing this we are moving on shaky ground somehow, and this cannot really happen if we don't ensure the full transparency. Reminding you of the scandal from Facebook, I think banks can get into this new business model only if they are clearly transparent, not only on how they use data but as well providing full flexibility on how to manage and update the privacy, creating really privacy by design. But this means as well being totally transparent on how we earn money, which is somehow quite counterintuitive for banks, since our revenue model is really intransparent. We are actually the only industry charging without asking people permission. We're not sending invoices, we're just taking the money back from the account.

[00:12:32] So this means that if we create a new, more transparent business model, we need to rethink as well how we communicate on this. So it means that not only on the service layer, we need to fundamentally reshape how we communicate on our services, full transparency, and as well on the pricing model.

[00:12:54] And so, a good example on how to communicate on the revenue model: I worked together on a partnership with N26 before, in Berlin, and what I really enjoyed is how they managed the kind of classical business model of the overdraft. And the overdraft is again a tool for banks traditionally to make a lot of money. Nobody is telling you when you get into the overdraft and you're actually being charged quite big time on this. So what N26 was quite clever about, they made it totally transparent to select the limit, and they offered the opportunity to have an overdraft allowance. So it means they are totally transparent on how much does it cost, how much flexibility you have to have the right overdraft for you, and you can as well be informed to avoid that, okay, you're going into the overdraft without being aware of this. So I think this is definitely a direction where we should move.

Using data for a greater purpose

[00:13:56] The other opportunity, and which is in my opinion a bigger opportunity on a larger scale, is how can we use the data for a greater purpose and sustainability. And I think banks in general need to go beyond what the legislation is asking for. I mean, like GDPR legislation or that type of thing, we need to go beyond it. So how can we use the credit card data to help people to consume more sustainably? How can I compensate for my carbon footprint? These are new topics which are really concrete, because we are now partnering up with the Åland Index, which is one index which helps you to track your spending habits and see actually the carbon footprint of your own consumption on a monthly basis. And I'm going to show you a video which explains a little bit the index.

[00:15:05] Video: A group of small islands in the middle of the Baltic Sea is home base for a local bank. For almost a hundred years it supported the families of farmers, sailors and fishermen living from the sea. Now 90 million people living around the Baltic Sea coastline dumping a mix of toxins into its waters. The situation is critical and oxygen levels are alarmingly low. The seabed is being strangled to death, and in parts it's already dead. It's obvious: in order to care for our customers we need to care for the sea. As a bank we analyze data to try to understand risks. We also wanted to apply this behavior in an environmental perspective, in order to influence everyday decisions made by our customers.

[00:15:51] Video: To enable this, the Bank of Åland developed the Baltic Sea Project credit card and the Åland Index. The index merges credit card transaction data with that of financial investment analysis, and calculates the individual carbon footprint of each transaction. This alignment has created the world's first bank index for everyday environmental impact. The result is presented with a monthly bill, as are the options to compensate locally, globally or by lifestyle. Over time you can track and compare your behavior with the national average for all the status levels. The bank is now replacing all its credit cards in Finland, and soon they will also be available in Sweden. But no man is an island. That's why the Bank of Åland is making the index available to any bank that believes that change is driven by insight, substantiated by data, and created together.

[00:17:12] Fabien: So now we are actually integrating the Åland Index. It is one example of the things that you can do out of the data. And the Åland Index is not only tracking your monthly spending and how environmentally friendly it is, it helps you, you can compensate as well for the carbon footprint, you can invest, donate some money to sustainable organizations. You can do different things on that. So I think it's a very interesting model which shows that we can go actually much beyond what we have thought about previously.

Exploring new grounds: the bank as gatekeeper

[00:17:45] And the last aspect is exploring new grounds. And this really started, and I remember the first part of my presentation was related to how tech giants are handling data and the lack of trust that they are having at the moment, which creates somehow a new opportunity, because banks traditionally have been kind of more trustworthy on how they handle their financial data. So in the previous business model that we considered, between merchants and users, somehow the bank was kind of, I would say, I wouldn't say data broker, but quite close to it. So how can we use the data to facilitate the exchange of value?

[00:18:30] The next level is actually, how could we rather position ourselves as the gatekeeper? So not monetizing any sort of data, but actually protecting the data and helping people to be aware of how the data is handled and being in full control of it. So this is something that we have started to explore, and we did a lot of research last year. We did some qualitative and quantitative studies and we sent a questionnaire to thousands of people in the Nordics, and we asked very different questions which relate to the handling of their own data.

[00:19:11] The first question was, have you ever thought that you would like to get a better understanding on what data different companies have about you? And I guess from your answer you would answer mostly yes. So in the Nordics most of you, it was like 84 percent, actually are concerned about how the data are handled and would wish to have more information on how the data is handled and have better control over it.

[00:19:39] The second question was leading on, because the data was traditionally, I mean the last few years, more on the social media and tech giants. So: how trusting and confident do you feel about social media, Google, Facebook, to handle your personal data? So if you look at it, the answers are in Finnish, so the one is not at all and the seven is very confident. So you see that the majority of respondents felt deceived and didn't really perceive all these tech companies as being trustworthy.

[00:20:13] So the interesting thing, and where I see the opportunity for banking, is that when we asked the question, how trusting and confident do you feel about your bank to handle your personal data, then it was the other way around. And like I said, we asked especially the respondents in the Nordic countries. So we see clearly an opportunity for banks to leverage and create new services based on the trust that they have on the market.

[00:20:38] And the last question is, would you like to have your bank providing an overview of all data handled by different companies as well as full control of it? And in this case 74% responded yes. And we did, like I said, we validated our assumptions before with qualitative studies and we made a survey following it.

[00:21:06] And there are some interesting examples on the market. There are a lot of things happening in this space, MyData at the moment, but one example from Deutsche Bank in Germany is that they started offering this API and platform for people to have access to the banking data in third-party environments, and so they started really launching several services using the trust that people have in their institution. And at Nordea we are actually prototyping and testing new services in this respect.

[00:21:43] So, and I would be a little bit selfish: would you trust your bank to handle your personal data from third parties? Please raise your hand if you agree with the statement. All right, all right. So we are not there yet. Thank you very much.

Q&A

[00:22:10] Host: Thank you for that, that was an awesome talk. Are there any questions that you would like to ask regarding this?

[00:22:21] Audience: Welcome back. Are you gonna threaten us again? Or simply this: I love the ideas, it's all very world-embracing stuff, but I think the banks are in it for the money, so where's the beef for the bank?

[00:22:44] Fabien: Yeah, that's a good point, and I think the dimension is the business model. Because of course you cannot say, MyData for instance, which is an initiative where you can somehow monetize your own data, but based on our research it's not really what people want. So, are people willing to pay actually for a monthly subscription, for instance, to have access and control over all of the data provided in third-party services? Which is something that we are testing at the moment. But the business model should rather be on the user side, because then we will ensure full transparency and trust in the system.

[00:23:24] Host: Thank you. Anyone else?

[00:23:32] Audience: Just a personal interest, for the compensation of your, let's say, CO2, are you considering like green financing or like this stock compensation or something like that?

[00:23:46] Fabien: Yeah, we have a few solutions on this, our green stock, and we have invested quite a lot in this, like impact investing that I've seen, but it's mostly for investors. It would be interesting to make it available to the public, and it's something that would be one way to do it somehow, because I think like in Finland people are still kind of shy when it comes to investment and funds or stocks. So that might be interesting.

[00:24:15] Audience: Yes, thank you for the presentation, it was very interesting. I would like to ask you about this example with N26, when they showed the overdraft threshold and stuff like that. So you said that for the bank it means that the bank will lose revenue, because for the bank it's good that people go over and they are charged. How difficult is it for you to convince people in order to actually go for that transparency and honesty towards the client? What does it take you to do it? Like user testing, is it prototyping? What kind of tools do you use to convince people about it?

[00:24:51] Fabien: One tool is giving public talks about it, so this is definitely one way to convince other people to change the mindset. But I won't tell you, but it is really hard. It's really hard, because we are working on new services, so people expect, okay, it's fine to have like the great bones[?], well, it's investment, new types of services. But this, that's the core of what banking is and how banking has operated in the last decades. So it's something related to change: how can we trigger the change? I think we can trigger the change by launching services like this Åland Index and showing that there are new ways to do it, and as well showing that there are new ways to make money.

[00:25:40] Fabien: Because currently most of the banks focus heavily on the user experience, digital apps, but there is no new model behind it. So that's why we are really experimenting with new business models, to show that actually behind it there would be new revenues as well. So it means that we could compensate the lack of revenue on this side, providing full transparency, with new revenue models. So I think that's one way to convince, that over time we would move in this direction. But we are not there yet, that's definitely, yeah.

[00:26:16] Audience: Thanks for the speech. You were mostly speaking about the services targeted for consumers, but have you planned any data services for companies?

[00:26:24] Fabien: Yes, that's a good question. It's something that we are considering as well. The thing is that I haven't communicated heavily on it in my talk because it's still under development, but in a way, when I showed the type of platform business model, these are services which would be offered to corporates as well. So there is one part with the value proposition to the end user, but the other part is to corporations, and there are many things that you can see out of aggregated data from the credit card company. And many companies, like BPI[?] in Spain for instance, are being quite active in the space, but we are rather cautious and we rather use aggregated data for sustainable purposes, for instance to show that there is actually something you can do for a greater good. So that's where we are doing both and working on this, definitely.