Q&A With Pinar Ozcan
Associate Professor of Strategy, Warwick Business School
Digital transformation is disrupting markets and threatening the position of many corporations. For example, as Pinar Ozcan, Associate Professor of Strategy at Warwick Business School, explains to Thinkers50, recent developments in banking are likely to fundamentally change the way that we perceive and consume financial services. Dr. Pinar Ozcan specializes in strategy, entrepreneurship, and the emergence of new markets.
IS OPEN BANKING BAD NEWS FOR BANKS?
T50: There are important changes underway in banking?
The recent European wide regulation forces banks to allow third parties to make offers to consumers based on looking at the customer’s data held by the banks. But only if the customer allows that. The logic behind this is that the banks are sitting on all this data from customers but not analysing it and using it in an intelligent way, nor giving customers better deals.
T50: So the idea is to free up this data in the interests of the customers getting better products and services?
What this means is that any company, including other banks can access my data. But it also means that if Amazon or Google, for example, want to get into the finance world these players already have the legitimacy to actually steal away customers from banks by giving them better offers. Recent surveys suggest that, over 70% of bank customers under 40, and close to 50% of all bank customers say they would feel comfortable banking with Amazon, Google, Apple, etc.
It also has broader implications in terms of people being able to look at all of their expenses as part of one intelligent platform. They can analyse all their different outgoings, all their expenditure, and optimize them. It also fosters convergence between different sectors.
T50: This seems like it will have a profound impact on some markets and the traditional retail banking model in particular?
It has implications for the competitiveness of different markets. Some markets are going to be restructured. Potentially banks will have to reinvent themselves.
For customers, data will be used in a more intelligent way. As customers we will be able to benefit from how technologically advanced companies analyse our data and, therefore, we should get much better deals. Although there some that will argue that this could create a “Big Brother” type situation where a few companies rule the world. And that authorities, such as the European Union regulators, will never allow such monopolistic situations to arise.
T50: What do you think will happen?
I think that all of these things are going to happen at the same time. We will use organizations such as Google and Amazon for increasingly more services. At the same time these organizations, recognizing the potential monopolistic, anti-trust issues, will seek to collaborate more with other incumbent organizations, such as the banks, rather than going it alone.
T50: Inevitably there will be a period of disruption as this plays out?
There will be period of uncertainty where there will be different kinds of models. None of this is in the interest of banks, though. All of this is bad news for banks. All these models, this new way of operating, rely on customers feeling comfortable with giving access to their data. Banks will be hoping that most customers will not want to do this.
T50: And although it may be against the law to warn customers against sharing their data, we can expect banks to push back.
Yes you are likely to hear more from banks about the importance of trust and security issues around data.
T50: The digital generation has a very different attitude towards sharing data than the generation that are running banks, though?
When I go to conferences, a lot of the fintechs that advertise there include a lot of statistics in their brochures and flyers. One statistic that struck me was that 73% of millennials are completely happy with licensed third parties looking at their data, because they are used to sharing information.
T50: So will we see a major shake-up of the market this year?
It depends a lot on what the giant tech companies are focused on. They have many different avenues of exploration at the moment, whether it is robotics, virtual reality, machine learning. These are huge trends that require a lot of focus and resources. These giant tech companies may decide to go into the financial sector, but not make it their strategic focus for the moment. That buys the banks more time.