In a previous blog post I have already raised the question when we will finally see a “Spotify of Banking”: a provider of financial services that we don’t want to switch because the service knows us too well and thus creates positive entry barriers for other providers.
I know there are – especially in Germany – many people who don’t like the idea of sharing data. But if you take a look at different industries you can see that services that make use of consumers data is growing a lot, which is an indicator that more and more people are happy to trade their data in return for something.
But trade in for what? In my previous blog post I only talked vaguely about a banking service that makes better usage of financial data and provide a better service. I have taken a look into at some services that I am using that make use of my data and categorised them based on their benefits for me. Basically, there are two main benefits for me:
1) Better prediction: Spotify, Amazon & Google Maps
Spotify is the best example for this. I am feeding my music likings on daily basis into Spotify and in result Spotify can suggest songs I might like as well. That Spotify is analysing my music history and comparing it to the music history of other users is not something I am afraid of but have massive benefits of it. If I like four songs and person X likes the same four songs plus an additional fifth song – good chance that I am liking this song too.
Other good examples are Amazon and Google Maps. Purchasing most of my things on Amazon, helps them to understand my likings and needs, thus, new product offers actually target my interest and needs. Is it scary that Amazon knows what I like? Not for me, I enjoy it. Google is doing the same for many products. However, while using Google Maps I can even benefit from it even without any history. The traffic prediction inside Google Maps is calculated based on data of all active Google Maps users. Some people might not like that Google knows how fast they are going on a certain street, but without this, there were no modern traffic prediction.
2) Data in one place: Strava & Swarm
I track all my runs with Strava and have nearly all my runs from the last years saved in the Strava app. Even when I switched from another provider to Strava, I made sure all runs with the other app can be transferred to Strava as well.
The same concept applies to Swarm. You probably don’t know Swarm but might have heard of Foursquare. Foursquare provides feedbacks from users for restaurants, bars and all other kind of places. With the separate app Swarm you can check into the place (similar to Facebook check-in) and let your Swarm network know where you are. For some people it might be some kind of competition as you can gain coins for every check-in and compete with your friends. However, main reason for me to use Swarm is a similar reason I am using Strava: I have a long history of all my data in one place and I can easily access it later. When people asked me about places to go in a certain city, I use my Swam history to find that one cool bar which name I cannot remember. And with Strava I can track my progress and identify conditions that make me run faster.
Probably you could also add this blog to the list of services. One of the main reasons for starting FinTech-Musings was to keep my thoughts in one place and have a journal with my thoughts easily accessible.
But what about banking? Are there services out there that fit into one of the categories above? Financial data is definitely quite special, because it touches so many area of our lives. Whereas Spotify is only about music, banks get data about all kinds of activity from their users.
However, there are now services starting to tackle the first category. This is a trend picking up at the moment thanks to ‘Access to account’ (XS2A) and making the data available to companies who know how to work with data. Many different contract management services are starting at the moment and enable users to read out existing contracts from the bank account transactions. Further possible actions are to cancel the contract or switch to a better / cheaper option. Bank account data is the perfect way to define what status the consumer is in and help him to improve its situation in different ways. Expenses for financial products (e.g. loans), insurances or monthly contracts are just the starting point. The bigger picture could be complete consultation of spending behaviour, for example for transportation or health care. Using more data sources will be required for that, and our financial footprint needs to be connected to other parts of our lives.
And what about the second option, where the user is putting all its data into one app or service in order to have it central and easily accessible? There might be people who only have one bank account and use it for every purpose. However, I am certain that they are not able to make use of this historic data in any way. Quickly checking for the expense that occurred at the beginning of the year that might be tax relevant? Good luck finding it. Don’t even think about the expenses you had a few years ago – they are “gone”. That’s why I am using multiple bank accounts, to group my transactions for certain purposes (e.g. flat related expenses separated from main expenses). That would be like using a second activity app to track my cycling separately from my running activities. Doesn’t make sense right? In banking it does, unfortunately. Services like bunq are now offering the opportunity to open up to ten different bank accounts and use them for different purposes in the same interface (Blog post). Might be handy for some, but personally I believe there must be a way to achieve that goal without being forced to control several different bank accounts. Maybe it’s time to abandon the system of bank accounts in general and switch to financial identity instead?!