Data is the asset. Trust is the currency. Consumers have been sharing data with brands for years, but with greater access to more personal data, financial brands have both an opportunity and a responsibility as to how they use this information.
Hossein Rahnama is CEO of Flybits, one of the world’s top fintech companies. Hossein talked with Andrea Fabbri, Managing Director of BrandingBusiness’s New York office. The two talked about the need for financial institutions to apply context to data to deliver relevant recommendations for consumers and how fintech companies, like Flybits, and banks should work together to learn how to share data in a privacy preserving manner, and come up with new business models in which the end user owns the data, and they share it in exchange for value.
Fintechs relationship with banks
Data as a new asset
Why banks should invest in personalization
Contextual banking: the future of the financial institution
Welcome to Expert Opinion, the BrandingBusiness forum where leaders share their views, insights and experiences from the world of B2B Branding, and now, here’s your host.
Andrea: Hello, everybody. I’m Andrea Fabbri, Managing Director for BrandingBusiness, and welcome to Expert Opinion. Today’s guest is Hossein Rahnama. I really have been looking forward to this conversation for some time. He is a recognized figure in ubiquitous and pervasive computing. In 2017, he was recognized as one of Canada’s top 40 under 40. He’s been recognized by the MIT technology viewers one of the world’s top innovators, and the Smithsonian also named Hossein as one of the top six innovators to watch. Hossein is the founder and CEO of Flybits, also a client of BrandingBusiness. Flybits works with banks and credit unions to embed a multi-dimensional contextual lens across the customer’s mobile experience. This allows banks to deliver the right message to every customer in the moments that matter the most. Hossein, really a pleasure to have you with us today.
Hossein: Thank you for having me. Great to be here with you.
Andrea: Thank you. As I said, I have been looking forward to this conversation for some time, and I would like to start by setting the stage. Everywhere I look, everywhere I read, whether it’s podcast or news media, the financial services industry has been going through a great deal of disruption, particularly in recent years from a variety of new up-and-coming digital-based alternatives. Now, then COVID certainly exacerbated the challenges of the traditional banking model, revealing cracks in the internet, in the organizational structure, but also in the customer experience model.
So, I’d like to start with the first question, which is, how are fintechs, at least from where you are, reshaping the financial services industry, and what is, if you don’t mind me saying, the threat that they pose to banks? Or how are they challenging banks?
Hossein: When I look at fintechs, I mean, you can categorize fintechs into two general buckets, the ones that are building horizontal-enabling capabilities and the ones that are providing some very focused turnkey solutions to their financial sectors, but what’s common among all of them is that they are using data as a new asset. They are essentially treating data as a new asset class. As some of them, they are using their own data, they are collecting their data, and they are making the most of it. The other ones are trying to interconnect with the bank’s data and really focus on experiential design and customer experience to differentiate their offerings versus the banks.
The classical view a few years ago was that, well, fintechs are going to disrupt the banks. To some extent, that happened, but in a lot of cases based on our observation, it was an opportunity to form an ecosystem and data and data portability and data sharing will play a key role in the success of these ecosystems. So, what I would say is that fintechs who understand how to use data, banks who understand how to share data with fintechs will win this game. The ones that cannot use data correctly will fall behind.
Andrea: Yeah, absolutely. I agree. So, you talk about fintech, so, that is the supply side, if you will. What about the consumers? What’s happening when you look at the consumers in terms of how are they and their behavior affecting change? How are they pushing banks to change? Can you describe a little bit what are the dynamics there?
Hossein: Things are changing for the end consumer. One is that they are becoming very worried on how their data is being used by big tech firms. When you go and register an account with a big social media firm, essentially, in many cases, you’re giving up the rights of your data, but when you go to a bank and deposit a check, that’s your financial asset, but you’re trusting the bank to manage that financial asset on your behalf through a legal contract. So, on one side, you can see the privacy concerns of the end user especially working with big tech, but at the same time, when you compare the user experience, the predictability that user interfaces have offered by big tech versus banks, the big tech is really winning that, and banks are playing catch up. Most banks are now thinking about, how do they make their digital channels more predictive? They are realizing, well, they have an asset, which is trust that many big tech firms do not have. So, consumers are becoming more comfortable sharing data with the bank, but they are not receiving the experience that they get from the big tech. On the other side, they are becoming more concerned about their data in the hands of the big tech, but they love the user experience.
So, the opportunity here for banks as well, now that they have relatively the trust of the end customer, they know about their customers through their financial transactions, if they invest in personalization and user experience, they can actually form alliances and ecosystems that can be as good as big tech when offering services to the end user. There’s one other element that is helping banks in this case, and that’s regulation. Those are privacy directives that we are starting to see around the world. In Europe, it’s GDPR. In California, it’s CCPA. In Canada recently, we have a C11. Essentially, what most of these regulations are talking about is that, okay, banks, the user owns the data, not you.
What does this mean is that banks now need to focus a lot on experience design to convince the end customer to share data with them, because if the experience is not good enough, if their value is not there, well, the user does not have any interest or motivation to participate in that data exchange. So, considering this whole physics that I talked about, there is a huge opportunity for banks and fintechs to come together, learn how to share data in a privacy preserving manner, and come up with new business models in which the end user owns the data, and they share it in exchange of value.
Andrea: Yeah. Excellent. So, which then brings me to Flybits really. How is Flybits then therefore helping banks and taking advantage of these two types of opportunities that clearly, the banks have to take advantage of in order to stay relevant.
Hossein: We built a platform at Flybits that essentially is the fastest way to turn a data asset into an engaging experience. When we look at banks, almost all of them have a project called digital transformation. Basically, what it means is that, how do I bring my data assets, understand it, and use that to engage with my customers better? When we talk to the owners or executives responsible for digital transformation at banks, almost all of them tell us, “90% of my budget is being spent on IT complexities, and although at the beginning, I talked about and envision all these amazing use cases, I could not bring them to the market at scale because I’m a bank. I’m not a software engineering organization, and no matter what I do, the DNA of my organization is a financial institution.”
So, we had that in mind, and we built a tool that really reduces the over-reliance on IT departments at banks, and really empower creative units, marketing units, digital channel units of banks, to really focus on experience design. So, we have created these packages and workflows that we call them FinBits, financial bits, that are mapped against the anatomy of banks. FinBits for card services, FinBits for wealth management, FinBits for fraud detection, and using a very intuitive user interface, executives, digital channel owners, marketers at the bank can use these drag and drop interfaces and build financial experiences using their proprietary and privacy preserved data.
The analogy I use is, remember the mid-’90s of the consumer-facing internet. You had to be a developer. You had to be a software engineer to build your web platform. Then, you started to see utilities, web offering tools, platforms like WordPress that brought the whole creative ecosystem around the web, and that resulted in a whole new economic model. We believe the same thing will happen when it comes to AI and data science, and banks will have a significant role to play there, not because they are a financial institution, but they can become a trust hub, a hub of digital co-creation for a very large number of users and if they can put these digital tools in the hand of their small business customers and end users to co-create with them, and that’s exactly what Flybits offers as a platform.
Andrea: That’s beautiful. Having done work with you, one thing that was very striking about what Flybits does is identifying contextual opportunities that enable banks to define the best moment throughout the life cycle throughout the day frankly, when to reach a consumer. Can you explain to our listeners, why is context so critical for banks to truly deliver personalization? There is so much talk about personalization, and everybody has its own definition, but context is often overlooked. Why is context essential?
Hossein: If you look at the modern history of computer science, personalization has always been there, going back to personal computers and personal digital assistants and personalization on the web. This is a very normal thing. It’s what we expect from a lot of goods and things that we consume. We want them to be relevant. However, if you look at the economic dynamics, data dynamics that we are in, we are surrounded by zettabytes of data assets. There are too many optionalities. We have devices in our pockets that has 50 sensors in them that can read different things from API to gyro sensors, to location sensors. Well, if we use those data sets correctly based on the consent of the user, we have a lot of information to make the information delivery more and more relevant to them.
Personalization goes way beyond what I call these PFM tools or personal finance management tools that, hey, you spent too much on coffee last month, or your bill is due. Those are very linear type of transformation that you could do them at 20 years ago, but if you truly understand the context of a banking user, for example, you’re planning your life expenses for the next five years. You’re at home. It’s 8:00 p.m. I understand that context, and I adapt the user interface accordingly. I understand that you may be traveling, and based on that, you may require some cross-border banking. I understand that you want to use your credit card, and you may want to use your loyalty program to do a purchase.
There is a lot of data that, if being used correctly, you can personalize these services for the end user, not just offering them financial products, but truly bringing an experience that is related to that financial context. I’ll give you one last example. We are working with a number of very large financial institutions around the world from U.S., Canada, UK, and Australia. One of the areas of our work is we help them with their mortgage services. Mortgage to a bank is essentially a loan with some terms and some interest rates, but to the end user, it’s about my life. It’s about moving. It’s about my lifestyle. It’s about my job. It’s about my security. So, in a lot of our new deployments, of course, a bank can personalize a mortgage offer for the user. In many cases, not even you can offer a mortgage offer to the user, but you combine that with a preferred access to a utility company that is relevant. You combine that with a moving company on the day of moving. You combine that with a cable service, all part of the same offering.
So, the bank now is not just offering a relevant experience to the end user, but it has also used Flybits to form partnership with a cable company, a utility company, to use all of that data based on the permission for the user to create a moving experience. Contextual banking. You can refer to this in card services. We do a lot of interesting work with our partners around credit cards and card services, but that’s kind of where we see things are going. That’s what we refer to as contextual banking.
Andrea: Yeah, what’s interesting to me about contextual banking is that it really poses the question, what is a bank at the end of all of this? Because if suddenly, the bank owns, is able through context to own a relationship with a customer and adding value through going beyond the banking, going beyond mortgage, like you were saying, a moving service or a travel service or a relocation service, just because the bank has the ability and has the access to the data, one then has to kind of, next question, what is the bank becoming? If the bank moves ahead and takes advantage of this opportunity and moves ahead and moves forward along this path, what is a bank at the end? What is the bank becoming?
Hossein: There is a significant opportunity for banks to transform, and COVID has been a terrible thing for all of us, but it has really acted as a catalyst to transform banks organizationally, technologically and also based on their business model. So, data plays a significant role. Look at the digital transformation at banks when COVID happened. It pushed banks to execute their digital transformation from being a 10-year strategy to a year strategy, because they really had to accelerate branch networks that were no longer as effective before. So, the banks of the future are not just going to be owners or custodians of financial assets. I think they can become very important data exchange platforms between users, between businesses, between governments, and they can play a significant role, but in that case, it’s not the money that is the asset class, but it’s the data and how you handle data.
When I go and deposit a check, I commit to a legal contract on how my bank manages my financial assets. Think about the same thing in the data world. I deposit my data with the bank, and I give them permission to correlate that data with the telecom data, with health data, to generate new insights. Those insights will help everyone including myself and my community. My local branch can become a conduit for me, enabling me to invest in my local coffee shop, small businesses that are suffering. Why don’t you use branches to really play as that trust hub, that hyper-local trust hub for elevation of community’s wellbeing?
The bank can do that. The infrastructure is there. The data portability structures are there. They just need to think a little bit beyond the current business models, which are a lot of it based on service fees and interest, into a model in which, wow, the new asset class is the data, and here is how we can leverage our trust factor, compare to the big tech, and use that to build competitive advantage. That competitive advantage is not going to be created just by the bank alone. It’s going to be an alliance in which a bank can create with members of their economy or their community such as a telco utility company, supermarkets. They all share data based on the consent of the user to generate economic value.
Andrea: It really is an incredible future. Often, I hear banks being criticized for their siloed thinking, but in a way, it’s not just banks. It’s an entire, almost an entire evolution here moving to siloed thinking for each business to a more of an ecosystem thinking. If you start going on that way, you create connections among different businesses. That is an incredible future that can open up incredible opportunities not just for banks.
Hossein: Look at what happened in the airline industry in the ’80s. They had to go and form alliances because of deregulation and competition. The same thing will happen to banks. They have to go form alliances in order to prevent the disruption from big tech firms because the moment big tech firms get access to financial transactions and the details and the categorization of expenditures, they truly become very disruptive to banks. The only way banks can prevent that disruption is to form alliances with their corporate customers, connect them to their end users, and use that data physics and that data portability to create economic value. Trust is going to be the key factor at how do you quantify and monetize trust so that the user is feeling comfortable sharing data with you.
Andrea: Yeah. Trust is the currency and the infrastructure that will be needed to enable to circulate that. Well, this is a fascinating conversation, Hossein. I’m really thankful for your time today, for the insights you’ve shared. Thank you again for your time, and good luck again with Flybits.
Hossein: Yeah. Thank you again. You have been a great partner of ours, and yeah, looking forward to continue our conversation.
Andrea: Thank you.