‘Data to cash’ as a service: Time to invest in open banking

10 June 2020

By Andries Smit, CEO and founder of Upside

There are 11.95m+ households in the UK with less than £1,500 in savings. Since early March, the catastrophic impact of the coronavirus has only highlighted further the treacherous situation the country is facing regarding personal savings. For the financial world, this offers a unique opportunity during the next 12-18 months to attract a large number of customers by helping automate their savings. What’s more, Open banking data, machine learning and AI could provide the answers at scale, where old processes and analysis can’t.

Why is open banking now more relevant than ever?
Now, in such uncertain times, it’s front of mind for consumers to keep their financials in order. But where can they get ‘spare cash’ from when the whole of the UK, in fact, the world, is in the middle of an economic crisis? The answer, their data.

Ever since the banks were forced to allow access to their data through various partners, companies have been looking for business opportunities, and the truth is, the opportunity and benefits to banks having to play nicely, are all with the customer. Customers stand to gain from having businesses understand them better as with increased knowledge about them, it means they can be served better. Ever had an email from your bank full of good offers, all of them totally irrelevant to you and where you shop? Expect that to change. So far, the change has been slow as there are many blockers to progress, one being retailers and their change of approach.

Until now, they have been focused on new customer acquisition. However, it’s likely that many ‘new customers’ have actually been a customer before, just not recently. Through companies using open banking, retailers will be able to attract new, win back old and delight their most loyal customers more accurately.

Machine learning can take all of that data and tell if you are a fan of one brand and what your likelihood of affinity to another brand is. It brings personalisation to a whole new level above simple segmentation. Again, with the aim of improving the experience and offering to consumers.

Tap into a new lifestyle - savings
Topcashback has made a huge success by sharing its affiliate revenue with the customer. Honey was another success story to come out of the last few years with a Chrome extension/toolbar which helped find discount codes for any retailer as the customer was about to checkout on the retailer’s website. The issue with this is two-fold: firstly, for discount and cashback sites, the customer has to undertake an action - visiting the site first to enable a cookie to be dropped. Secondly, although the toolbar got around this issue for the customer, for the merchant, understanding the true ROI of such business, whether they would have had that sale anyway, is difficult to measure.

We know a few things to be true: Customers like cashback, the more immediate the reward, the better. Customers do not like friction and really don’t like when the system doesn’t work - currently affiliate sales have around a 15 percent failure rate on tracking. Merchants have a hard time with which channel they should attribute a sale to, customers often set up multiple email accounts to take advantage of the offers designed to attract new customers. On the face of it, this looks like the deal works, but a dedupe of credit cards and delivery addresses would show that many repeat customers find this loophole, showing that these vanity metrics don’t really hold up under scrutiny. It’s understandable that companies work this way, only 15 percent of companies are able to tie the calculation of customer lifetime value to revenue & growth.

Rather than focusing on the top of that marketing funnel and the constant push for new users, open banking can go to the one source of truth. Why not reward a customer who keeps coming back? A few key points here:
 
  • Personalisation: According to a study by Gartner in 2018, the brands who personalised discounts and calls-to-action outperform their competitors in revenue by at least 20 percent.
  • Advanced analytics: No retailer or marketer needs more data. They need actionable data with insights which can drive action and engagement
  • AI to power predictions: Allowing merchants to act to drive engagement and action from customers when the data shows they have the highest likelihood of converting a sale.

So by removing the friction for the customer, combined with consumers' love of getting cashback, it means customers can build savings from the money they are spending anyway, without having to sacrifice their experience.

A study by the Center for Generational Kinetics reveals 80 percent of consumers would visit a store they hadn't visited before if given a direct cashback offer and 74 percent of Gen Z and 70 percent of millennials spend more money online if they know they will get a five percent cashback. Additionally, 76 percent of millennials and Gen Xers view a store that invests its marketing budget to "pay back" loyal customers more positively than one that spends advertising dollars elsewhere.


There is no such thing as new customer
Cashback and voucher code providers are going to rise and have a chance to become a ‘new lifestyle’ for consumers and help retailers know their customers better than ever before; meaning offerings are relevant, timely and welcomed. Now, more than ever, customers look for brands who invest in them, who care, and who give back.

Those who grasp this opportunity and offer a solution which will help build a nation of savers will celebrate a rising number of loyal customers post-coronavirus. Estimates sit around 95 percent for the prediction of future revenue which will come from as little as five percent of a brand’s existing customer base. Bain & Company reports that a five percent reduction in churn can increase profits by five to 95 percent. Given statistics like these, retention through delighting and rewarding existing customers as well as new user acquisition is imperative. Brian Dunne from Gift Card Consulting, advisor and investor to Upside puts it really well: “There is no such thing as new customers, they’ve all seen you at some point. You are just not getting all their spend most of the time.”
 

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