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Inside Information

Trust and confidentiality have been the mainstay of relationships between financial institutions and their clients for centuries, so why would these companies place their core principles at risk in the battle for business? Technology advances have intensified competition in the financial sector with the inclusion of global tech giants and fintech startups introducing new playbooks to an evolving game. These newcomers, conceived in a different era, a digital one, have engineered their businesses on data. In their effort to establish viable business models, they scrape personal information on people subscribing to their services and applications in the name of delivering more relevant product offers (aka advertising) to fuel their revenue engines.

Apple is valued at US$612billion, Alphabet (Google) US$542billion, Microsoft US$448billion, Amazon US$401billion and Facebook US$369billion. They are the world’s top five most valuable companies, all technology firms, all with interests in financial services and serve billions of people globally. Facebook alone recorded 1.79 billion monthly active users in September 2016 (one quarter of the world’s population) and has 1.18 billion daily active users. These figures exclude one billion WhatsApp users (42 billion WhatsApp messages are sent every day), more than one billion Facebook Messenger users and over 500 million active Instagram users. Facebook owns these apps, emphasising its global dominance in the mobile app arena, and the scale of the worldwide directory it uses to generate advertising income.

In stark contrast, the entire South African banking industry’s market value was estimated at only $326.2 billion in 2015 (Marketline) catering for 31 million people. Financial sector incumbents lack flexibility, dynamic infrastructure and resources (talent and finance), to compete directly with disrupters of Facebook’s and Google’s magnitude. However, they have reputation, integrity and decades of specialised experience in their favour as reliable partners to provide financial services.  These value systems are a source of competitive advantage to leverage responsibly.

Relationships forged between individuals and their traditional financial institutions typically revolve around confidential management of financial affairs, irrespective of channel. This approach should be no different in the app world. So why have the majority of financial institutions’ applications followed intrusive start-up protocols, demanding access to contacts, microphones, cameras, locations, photographs and media, to read, modify or delete content on devices? These types of permissions border, if not betray confidentiality values associated with financial services. Unless clients concede their right to privacy and permit exploitation of their personal information and habits they are denied use of these apps.

Banks already collect abundant information on clients and maintain exhaustive transaction records. Analysis of this structured data reveals behavioural patterns, spending habits and insights with predictive capability to interpret events. One could argue that banks underutilise their existing client information, why then do they need more personal information? How will access to individuals’ photographs, media content or contact lists deliver better financial services? This intrusive tactic may be attractive for advertising based business models like the GAFAs (Google, Apple, Facebook, Amazon) and others, but banks are not in the business of advertising nor distributing client information to third parties. They provide financial services and are trusted to do so confidentially.

To remain competitive demands change, but not at the expense of an organisation’s principles. Trust and confidentiality have been highlighted as key values associated with banking affairs; polar opposites of publicity – which underpins business models used by digital conglomerates currently undercutting banks. Traditional banks were not architected to compete against these contenders, just as these new entrants do not possess some of the fundamental strengths and qualities inherent to banks. It stands to reason that until there are substantial grounds for banks to abandon their core values and shatter long-term trusted relationships with clients, confidentiality should remain at the heart of financial services’ strategies and the central vision when integrating technology into the daily activities between banks and clients.

Dr Amaleya Goneos-Malka, a marketing management specialist, focuses on connecting corporate strategies to digital innovation and customer experiences

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