Data Privacy in the age of Modern Banking

Banking ‘marketplaces’ have been on the cards for a while but they need to be balanced with financial responsibility, such as the ability to set limits or be removed from targeting. One of the latest initiatives of this kind, is from Chase Bank. The company recently introduced a new tactic to offer marketers direct access to the first-party financial data of its 80 million customers. Coined as Chase Media Solutions, the initiative is gaining traction for its innovative spirit, as well as the potential it has to revolutionize digital marketing.

Rather than selling cookie-based targeted ads on a website, Chase will use its deep knowledge of consumer buying habits and preferences to display targeted retailer offers that match an individual’s interests. Essentially, Chase is monetizing its first-party data and moving into walled garden territory. But what does this mean for consumers – and how does it benefit Chase? Let’s dive in.

Bank data is a gold mine
The financial services industry has long been in possession of incredibly valuable purchasing data. And access to these treasure troves of data would enable marketers to reach new levels of personalization, honing in on buying behaviors that a client may want to be kept private. Just think: a bank knows when you take out a loan for a car, when you apply for a mortgage and when you make a large deposit in your bank account – all of which is incredible telling to an advertiser who is looking to sell you a car, a house or another big-ticket item.

Through data sharing with affiliates, joint marketing agreements, cross-context online advertising, and outright data sharing, banks and credit card companies have worked within a highly regulated environment to successfully monetize their special knowledge. However, with new technologies and regulations, the efforts have become less lucrative for both financial institutions and their marketing customers.

This development comes at a critical time in digital marketing’s history, as research from Simplicity DX suggests that customer acquisition costs are increasing at a staggering rate – 222% between 2013 and 2022. As regulations tighten and consumer privacy concerns grow, finding effective, ethical ways to leverage data for marketing purposes becomes increasingly challenging.

But what does this all mean for the financial industry?
Chase – along with other banks that will undoubtedly follow suit – can now use its deep knowledge about consumer purchasing behavior to present targeted, customized offers from paid advertisers on its platforms. Visitors will only receive paid offers that match their interests. For example, if a visitor has purchased luxury home furnishings on multiple occasions, a bank may present to that visitor a special offer for high-quality couches through the platform on behalf of an advertising customer. Other visitors who do not have a luxury home furnishing buying pattern will not see that offer.

The value proposition is a powerful one as the bank is able to monetize its personal data twice. First, the bank makes money from marketers. Then, the bank also takes a transaction fee for the offer purchase itself. This dual revenue grab enhances the bank’s bottom line significantly, turning what was previously considered passive data into an active, income-generating asset. This model also creates a win-win situation: customers receive targeted offers that align with their interests, enhancing their overall banking experience, while marketers gain access to highly qualified leads, increasing their chances of conversion.

Reward does not come without risk
While there are undoubtedly positive customer experiences that could stem from this initiative, it doesn’t change the fact that 59% of consumers report that their concerns about data privacy have increased over the last 12 months – and a big part of this is due to a lack of understanding on how and what data is actually being tracked. For instance, consumers will frequently consent to data collection based on vague terms and service agreements, not actually knowing the true extent to which their information is being harvested and shared.

What’s more, a significant 68% of consumers would like the ability to control the types of data collected; they want to be able to say no about their personal data being used for secondary purposes and have their wishes respected. They also want to be able to say no to some things and yes to others, and then change their mind later. Granular preference controls can help build trust and enhance engagement.

In other words: Chase must balance a very delicate line of providing relevant ads without encroaching on consumer privacy. And the success of this program will hinge on what boils down to a yes or no answer from consumers. Either consumers will use Chase products and visit the platform to get suggestions… or they won’t. Achieving this balance will be critical for maintaining customer trust and loyalty in the long term, and determining whether Chase’s advertising strategy will be sustainable.

But is that enough?
While consumers should certainly further educate themselves about their data privacy rights, as well as actively advocate for greater transparency and accountability from the companies they frequent, the responsibility for protecting consumer data ultimately falls to businesses.

There is no doubt that managing consent is a complicated job. But given there are consent management platforms to help navigate that complexity, this challenging activity can become routine, allowing organizations to shift focus to other consumer needs while still honoring granular preferences. With the right tools and practices in place, businesses can demonstrate their commitment to privacy and build stronger relationships with their customers.

Consumer data can provide valuable insights that enable highly personalized outreach that ultimately drive business growth and innovation. However, it’s critical that this innovation is balanced with respect for consumer privacy. While financial institutions are seeking new ways to disrupt the financial marketing industry, they also have a moral obligation to adopt ethical frameworks, advocate for comprehensive legislation to be enacted, and empower consumers.

As the technology around us continues to advance at a rapid pace, we must do what we can to ensure our digital ecosystem prioritizes both innovation and individual rights. Striking this balance will foster trust and pave the way for sustainable and responsible data practices.

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