Digital Transactions Authoritative, insightful and timely information for payments professionals
Many years ago, in a press interview, I commented on the importance to banks and payment companies of understanding the then new phenomenon of Facebook. At the time, it looked as if social media might become a major platform for payments.
It turns out that mobile media has taken that role, and social media instead has offered a different lesson: without trust, all the new technology in the world is not going to matter.
Facebook will survive the crisis it has created by not being transparent about its business model. But payments processors could be more vulnerable to their customers abandoning them if they misuse the customer information they hold. Facebook’s users have nowhere else to turn. But it’s pretty easy for a bank’s customers to find someone else to process their payments.
How much information about customers might a bank’s marketing department desire to “scrape” if regulations or strong bank-privacy policies didn’t prohibit it? It’s one thing to try to sell customers banking services they might not need. It’s quite another to sell their personal information to the highest bidder without their knowledge.
Might it be that in blithely adopting every new technology or platform that pops up (Bitcoin, anyone?), the banking industry is going to find out there is much more to be lost than gained? It might be prudent to do a little more testing of what happens out at the edges of the normal distribution curve when you turn over the management of a customer’s payments entirely to a machine. As has been said, the problem with “lights out” data centers is that you can’t see what’s going on in there.
The disruptors are all agog about how artificial intelligence can deduce things about my payments that I may not even know. Is that alone sufficient reason to retire the guy in the wire-room who looks over my outgoing transaction for suspicious words or numbers and then holds the transaction up until he’s sure it’s both legitimate and safe, replacing him with an algorithm that wouldn’t notice the subtle discrepancies? There is a world of difference between doing transactions the cheapest and fastest way and doing them the safest, if slightly costlier, way. It’s a difference our customers might think worth the cost.
Which gets us back to the matter of value. Given the choice between a 100% automated way of approving and processing a transaction and inserting a knowledgeable person into the process, the latter is always going to cost a bit more and be a little bit slower. In such a situation, I hope I would find myself choosing the method that both the bank and our customer could trust the most, instead of whatever method promised a side benefit of generating new marketing information to sell customers things they hadn’t asked for and possibly don’t need.
The champions of moving fast and breaking things seem oblivious to what good bankers have always known: You are never going to gain enough by scraping and harvesting your customer’s personal data to make up for the loss of their trust when they find out what you’ve been doing with the information they entrusted to you.
Most people probably wouldn’t mind having their retina scanned to approve a transaction. But most are almost sure to object if they find out their bank was then going to sell their retinal pattern to the highest bidder. Then those patterns could be used to identify customers in photos plucked off the Internet to learn what kind of restaurants they habitually go to so the bank can target-market credit card offers to them. Or what type of sports events they attend so the bank can start marketing them seat-license loans.
What the 30-something billionaires don’t get—that privacy matters to a lot of folks—is something we in the banking and payments business need to not only be sure we do get, but also be sure that we remember.
The adoption of new technology has propelled the payments business to its current levels of volume and profit. Perhaps the lesson of Facebook’s comeuppance is that a new technology can be a speeding train in the night. Just blithely jumping on board could be dangerous. Or possibly fatal.
—George Warfel • GWarfel@haddonhillgroup.com
