Organizations are analyzing more data than ever before in an attempt to stay ahead of the competition. The use of third party data in business intelligence and advanced analytics, in particular, is growing rapidly, as companies realize that the data they have collected themselves, such as customer journey and demographics, doesn’t show the full picture. In order to use data to its full potential, companies need to be collecting external data too, and they are increasingly looking to do so, with Forrester’s Business Technographics finding that 73% of decision-makers want to expand their ability to source external data.
This presents a real opportunity for organizations who have amassed a large amount of data themselves, and they are looking to make money from it in every way they can. Data monetization topped IDC’s industry prediction list, with the market intelligence giant noting that ‘by 2019, 40% of IT projects will create new digital services and revenue streams that monetize data.’ According to Forrester’s Business Technographics, one-third of firms reported selling their data in 2016, up from just 10% in 2014, while Gartner estimates that 10% of organizations will have a highly profitable business unit specifically for productizing and commercializing their information assets by 2020.
There are a number of industries that stand to benefit from data monetization. Most of all, those in which organizations have been hit particularly hard by disruption and as a result lost ARPU (average revenue per user), yet still hold a wealth of data and insight into the characteristics and behavior of the mass population.
Finance, in particular stands to benefit. One of the main advantages that traditional banks have is the vast amount of financial data they hold about their millions of customers. They also have the structure and capital to exploit it. Speaking at the recent Google Cloud Next conference, Darryl West, Group Chief Information Officer at HSBC, explained that, ‘Apart from our $2.4 trillion dollars of assets on our balance sheet, we have at the core of the company a massive asset in [the form of] our data. And what’s been happening in the last three years is a massive growth in the size of our data assets. Our customers are adopting digital channels more aggressively and we’re collecting more data about how our customers interact with us. As a bank, we need to work with partners to enable us to understand what’s happening and draw out insights in order for us to run a better business and create some amazing customer experiences.’
Banks and credit card companies hold a wealth of data around their customers’ financial habits that are invaluable to retailers in particular. They have access to real transaction data – what consumers actually do, as opposed to just what they say they do. Their information can help to build a complete consumer profile, revealing where and when customers are spending money, where they go on vacation, when they are moving house, insurance information, and so forth. Retailers can leverage this in a variety of ways, from predicting sales volumes so they can adjust supply accordingly, leading to lower inventory costs and a more efficient supply chain, through to target relevant promotions according to location and trends.
Another industry holding data particularly useful to retailers is telecoms. They have a unique and valuable data source in their customers’ mobile phone usage data, which they are selling to banks and retail outlets for use alongside existing customer transaction databases to better understand customer location and purchase preferences, and thus target promotional campaigns in real-time. By using geo-location data, retailers can introduce customers to new products when they walk into a store or the surrounding area to entice them in. Location data also indicates when different demographics are massing in particular areas, and even when they have moved house, which presents a wider opportunity to plan where they are going to put their stores or bring a pop-up to an area to test the water.
There are, however, for both industries considerable challenges around how they can sell on their data, at the forefront of which is the legal ramifications. In the EU, privacy laws cover all data, whereas laws in the United States are more industry specific - focusing on financial information, health information and children. The Gramm-Leach-Bliley Act and the Health Insurance Portability and Accountability Act of 1996 are two prominent examples of such laws. US laws are further complicated in that they can vary from state to state. Failure to abide by these laws is likely to result in severe penalties, including large fines and, in some cases, criminal prosecution. Director of Hogan Lovell’s Privacy and Information Management practice group Christopher Wolf notes that: ‘Although privacy laws in the U.S. are not as expansive as those in the EU, the enforcement is far more robust. So, the EU has more on paper, but in many ways, privacy practices in the U.S. are under closer scrutiny.’
There are also contractual restrictions to take into consideration, particularly for telecoms companies, with many commercial agreements restricting data usage and further disclosure of data. Such clauses may be buried deep in contracts, so a thorough examining of these is key to mitigating the risks.
Another potential risk is the impact on consumer trust. Trust is vital, and some may see the sale of their information as a violation. While people tend to accept a certain level of data tracking as the cost of using services like Facebook and Google, there is a significantly lower level of public trust in banks, and if it seems they are using the data in a shady way, there is like to be far more kickback. They need to prioritize transparency, anonymity of the data, and ensure that a customer can stop their data being sold on if they so wish. The same is true for organizations in every industry. As monetization becomes more prevalent and strategies are put in place, the consumer will need to be kept in the loop every step of the way. There are already a range of options for individuals looking to sell their individual data, such as Datacoup, who pay $8 a month, and this could have serious implications if another company tries to exploit it too.
BONUS CONTENT: Rick Aiere, Enterprise Architect at AIG, discusses data strategy, the types of data, and the choices within the organization