Start-Ups Show How to Bank on Data; Fed Talks About Taking Action

Receiving Wide Coverage ...

Making Dollars on Data: As financial institutions turn to technology for revenue, efforts have been made to capitalize on personal data. American Express's Serve, for example, banks on the idea merchants will pay for spending habit data captured by the digital platform. But, as this article from CNNMoney illustrates, there are other, possibly better ways to capitalize on the data craze. According to the article, several start-ups are developing "data lockers," a cloud-based method of essentially protecting a person's data from everyone they don't want to see it. While the article itself doesn't suggest banks compete with the emerging start-ups, it's hard not to see the opportunity here. A big bulk of the data a consumer is going to want to shield from third-party is information financial institutions already have: credit card numbers, checking account information, personal data related to loan applications, etc. Offering to shield this data may be one service for which customers are willing to pay. As one commenter noted, "If the assumption is that customers have a choice, I can imagine many people preferring to have control over their personal data."

A BankTalk blog (not to be confused with our own BankThink) also questions the value of collecting and selling data. Instead of becoming data brokers, financial institutions should focus on leveraging information to cut costs, the writer suggests. As the blogger says, "I think there is a good chance that there is little or no opportunity for people to trade their privacy for savings because there is little in the way of private information which is not already available." Gleaning this information for free could significantly decrease costs associated with underwriting. BankTalk points to Sociogramics, a start-up that gets information from social media sites in an effort to help financial institutions underwrite loans for consumers with thin credit files, which could easily render expensive credit models like FICO obsolete.

Google Fattens Wallet: In other tech news, Google announced consumers will now be able to load any credit or debit card onto its mobile payment platform. The move is in direct contrast with its original plan to have bank partners enroll customers in the service. Google told the Journal it switched tactics because, under the original plan, integration "could literally take a lifetime to work through," though we suspect it also had something to do with how few people were actually using Google Wallet. (Rumors that a fully-loaded Apple wallet is in the works also could have contributed to the about-face.)

Citigroup, the only company previously participating in Google's platform, told American Banker the tech company's move to integrate more payment methods was expected.

The Fed Keeps Talking: Remember Monday's Scan, which discussed how the Fed was going consider doing more than just talking in an effort to fix the ailing U.S. economy? Well, according to reports, Fed Chairman Ben Bernanke is prepared to act … just not right away. According to the FT, the Fed plans to "closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery."