Selling customer data - good or bad idea?

Be careful with data

Many years ago a few banks debated the idea of selling customer data to get a payback. It was the wrong decision – if you sell customer data, it should the customer who gets the payback, not the bank – and they failed. The two specific examples I remember are Barclays and ING.

June 2013: Barclays to sell customer data

Barclays is to start selling information about 13 million customers' spending habits to other companies, and has admitted it could share the data with government departments and MPs.

In letters being sent to customers, it is also outlining what details about them it holds and uses which, it said, "may include images of you or recordings of your voice", as well as comments made in interactions with the bank on social media sites such as Twitter and Facebook. Barclays said it may collect "location data derived from any mobile device details you have given us" - suggesting it will be able to pinpoint where in the world a customer is at a particular moment in time.

However, the bank assured customers that any data it passed on to third-party companies would be aggregated to show trends, and that individuals would not be identifiable from it.

They quietly withdrew the idea months later, due to media pressure and also an unhelpful leak of customer data.

February 2014: Barclays account details for sale as 'gold mine' of up to 27,000 files is leaked in worst breach of bank data EVER

This was followed up by ING announcing they would sell and share customer data with commercial interests in March 2014.

March 2014: ING Plan to Share Customer Payment Data Spurs Privacy Concerns

A debate over banking privacy erupted in the Netherlands after ING Groep NV’s Dutch lender revealed plans to share customers’ debit card data with companies competing for their business. The bank wants to offer customers the option of receiving discounts from companies based on their spending patterns as revealed through data analysis.

The row blew up across most of the Dutch media, and ING rapidly reversed the idea. And yet the idea, both of Barclays and ING back then, was quite a good one imho. Since the 1990s, there have been discussions of banks using customer data to give customers payback on their accounts and yet, every time the idea bubbles up to a headline, the media and public go crazy.

DON’T SHARE MY DATA. IT’S MINE AND IT’S PRIVATE.

This was evident when PSD2, OpenAPIs and Open Banking came around a few years later. The media headlines were all about how banks were going to give customer data away and you were therefore 1000x more likely to be hacked. Absolutely untrue – why would regulators encourage banks to implement new rules that would make customers more vulnerable? – but the media did a good job of making is frightened and fearing it.

That’s why I claim it should not be called Open Banking. It should be called Better Banking.

Then, and this is why I’m talking about this today, JP Morgan Chase decide let advertisers target customers based on their spending data. This similar to ING’s idea ten years ago, where customers would get great offers and incentives to share data to get coupons and discounts;

April 2024: Chase Bank to Let Advertisers Target Customers Based on Spending Data

A new unit called Chase Media Solutions will let marketers tempt Chase customers with targeted deals and discounts related to their spending history. Chase joins a variety of businesses selling ad space on their apps, websites and other properties, often targeting messages by using their shopper and user data to generate revenue outside of their core businesses. The company already offered customers less-targeted deals [but] hopes the souped-up carousel of discounts on its app and website will add a little more shine to its credit card division as it looks to hold its position as America’s biggest credit card issuer.

Great idea, huh? It’s an idea; it’s not a new one; and it’s flawed. The flaw is:

DON’T SHARE MY DATA. IT’S MINE AND IT’S PRIVATE, AND I DON’T WANT ADVERTISERS OR ANY OTHERS GETTING ACCESS TO IT.

However, this can be overcome and it’s all to do with communicartion. Banks need to explain to customers in simple language what they are doing, why, how it keeps the customer secure and gives them better deals and payback. It’s a two-way street.

In fact, my friend Ron Shevlin thinks it’s a masterstroke for JPMC. Writing on LinkedIn, Ron says:

JPMorgan Chase & Co.'s new Chase Media Solutions unit is a stroke of genius. Why? Because Chase will get paid twice. And merchants will pay twice. It's too funny … it's a great move by Chase because they'll make $ by selling ad space and by generating more sales on its cards. It's an appealing deal for advertisers because--unlike other advertising approaches--they only pay when the customer makes a purchase. The irony is that when the purchase is made, the advertising firm not only pays for the ad, it pays the interchange fee on the card purchase.

In an inital trial with Air Canada, which they called a 'pilot' which is rather amiguous, they did get some great results. According to The New York Post, during a 30 day trial, the Canadian airline raked in $6.3 million in total sales. The average order value topped $500, and 80% of transactions were from new customers. You can find out more about this in the Chase case study.

It will be interesting to see if the JPMC offer works and, if it does, expect banks worldwide to follow this path.

Meanwhile, one piece missing from all of the above is the role of AI in the customer data sharing process. More on that tomorrow.