Data is the same as dollars in the digital world – it’s a currency that can be reinvested into companies’ products, services, user experience, marketing, and more. For years, data around users’ engagement, geotags, general interests, and spending habits has proven valuable for companies to understand, and deliver to customers.
All industries benefit from data monetization in some capacity. Amazon uses it to optimize its supply chain and lower operating costs, Deliveroo’s scheduled deliveries are based on data and have contributed to the company’s rise in sales. Barclays has also monetized its data by cross-selling services and products through its mobile banking app.
Data is especially crucial in FinTech, where it informs businesses how to onboard users, improve security, and create smoother processes. Since FinTech is quickly becoming the backbone of the world’s monetary movements, its data has to be applied smartly. And, in the context of the current economic uncertainty, monetizing data can help FinTechs be more resilient. Whether for optimizing digital experiences, opening new revenue streams, or reimagining operating models, data monetization has to be a priority for FinTechs in 2023.
Here’s why the industry can’t afford to not monetize data in the coming year.
FinTechs have a plethora of data that they haven’t fully tapped into. Banks in the U.S. alone have one exabyte of stored data, (for context, technologists estimate that all the words ever spoken by humans would equal five exabytes) but don’t necessarily know which data to select to monetize.
To determine which data has real worth, FinTechs need to calculate what the ROI of the data could be before embarking on the data monetization journey. It’s best to start small, running MVPs, pilots, and proof of concepts, and then scale the data project according to the wider business.
Generally speaking, the most important data for FinTechs are transaction activity, personal payment preferences, and location. However, FinTechs also need metadata (data about their data) that conveys the quality of the data, where it’s stored, and what it means. Such metadata comes from collecting quantitative and qualitative information on partners, products, and public data that contextualizes internal data. For example, reports and surveys that confirm public sentiment or tech trends.
Studies show that consumers are willing to pay a premium for personalized, tech-driven banking services. So, with an effective data monetization strategy, FinTechs can cater to user preferences and increase revenue flows.
As data monetization leads to business goals, new and updated tools will be developed to process larger, more complex pools of data. AI in particular will be able to generate more specific, accurate predictions from data, thus helping FinTechs to deliver better products and services ahead of time.
Monetized data can bridge the gap between traditional banks and FinTechs too. With open banking, FinTechs and other parties can use APIs to access financial data from banks. In the UK, there are already six million open banking users, and as more people around the world adopt services built on open banking, more data will be created to optimize FinTech products. For instance, with data about users’ credit history, FinTechs could choose to offer ‘Buy Now, Pay Later’ payment options to certain customers.
Elsewhere, companies like Nova Credit are embracing alternative data points such as percentile scoring and social signals to determine loan approvals for users. Meanwhile, more FinTechs have paired with freemium products like expense management apps to collect data about customers’ likelihood to pay premiums and invest. With more data empowering FinTechs to make informed decisions, modern users are being accommodated, and the financial space is made more inclusive.
For neobanks, data is also being harnessed to build educational products that help users to save and invest, not just send and receive money. Using data in this way is a powerful monetization method because it strengthens retention and longer-term ROI for FinTechs.
FinTechs often fail in their data monetization efforts because they apply playbooks from consultancies that are too broad and don’t align with the unique dynamics of the FinTech. But there isn’t a one-size-fits-all approach to monetizing data.
Each FinTechs people, processes, technologies, and desired outcomes shape how to move forward with data monetization. These businesses need to consider which people in the company utilize the data, how they do so, and if they have the technical skills required to deliver the transformation. Likewise, organizations have to review where they keep data, how it’s brought together, and where it’s sent to.
When it comes to infrastructure to store data, FinTechs must invest in the cloud and single-view capabilities. Real-time data is also key since the global digital shift has caused data to become irrelevant faster. Real-time dashboards also ensure that FinTechs are up-to-date on user tendencies and that they’re positioned to anticipate new competitors earlier on.
Data is just as essential to businesses as cash flow. It reflects the progress of a company and can guide the company and facilitate its growth. For FinTechs, monetizing the right data translates to meeting customer needs, keeping at the forefront of tech, and establishing a robust enterprise that can weather current and future economic crises.
Tap into the inherent value of data in your FinTech. Speak with an intive expert about custom data monetization strategies. intive solves complex FinTech design, and technology challenges in digital banking, digital wallets, payment technology, and blockchain for 100s of clients like Tandem Bank, Pockit, and Nubi.