CHRIS SKINNNER
DATA ISN’T OIL – IT’S AIR There’s plenty of it and it’s essential to their survival, but the banks’ respiration rate is dire, says Chris Skinner Someone said that data is oil but I disagree. Oil is a fossil fuel that is valuable because it is limited. Eventually, it will run out. Data will not run out and it is not scarce. We currently generate more data per second than ever before in human history. To put that in context, more data has been generated in the last two years than in the previous five thousand years of humanity. We upload 60 terabytes of data per second to the internet. That is incredible. Twenty years ago, it would have cost millions to analyse just one terabyte of data. The thing is, this ubiquity of data is just an overwhelming mass if it is not sifted. That is why I prefer to liken data to oxygen. Data is air. It is the air that we breathe. But if that air is polluted, we cannot breathe. That is what unstructured, unsorted data feels like to me. In contrast, analysed data is the purified air that we need in order to breathe properly and, if you are a bank, you need a lot of air. Right now, a bank’s air is not just polluted, it is also being stolen by companies that are better at purification. That is why we fear the internet giants – because they are so good at purifying data. Purified data allows you to see opportunities through analytics in order for you to leverage that data. Not only can you leverage the data, you can also become intelligent with it. This is where the artificial intelligence (AI) endgame starts to come into play. Taking masses of data – 60 terabytes a second – purifying it, and working out where the oxygen lies. To purify data, you not only need great analytics but also a great data architecture
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for analytics to apply AI. How fit is your firm for this? I asked that question to several banks and used figures from Forrester Group to illustrate the challenge. Forrester estimates that the average firm only tags three per cent of its data and analyses less than one per cent. I asked if that were really the case. Is it really that bad? All the banks I spoke to said yes. Data is a core bank asset and should be leveraged to maximum effect, yet most banks are terrible with data. It is locked up in different systems, none of which shares or interoperates with the others, and the idea of a single view of the customer is very hard. It can be achieved, but it is difficult to do. It must be done, however, as leveraging data about lifestyles is the core differentiation of today. Amazon, Google, Alibaba and Tencent all do this really well. It is companies born on the internet that get data leverage. This is why we admire them. It is also why we fear them because they really understand how to mine data. In fact, for years, technology companies have been urging banks to create a single view of the customer by mining terabytes of data using predictive analytics. Only the biggest firms could afford to do this, though, as it used to cost gazillions to mine a terabyte of data. Today, we are drowning in data, and only those who are fit to swim will survive. Being fit to swim is really about having a clear data architecture, being clear about how to mine that data, being clear about how to structure that data, being clear about how to tag that data and so on. In fact, data is the key to survival as, a decade from now, when all companies are
using AI for customer marketing and service, the question will be: who is using their data the best? We know that Amazon, Alibaba and their brethren born on the internet use data well. We know that we want to be as good as Amazon, Alibaba and company at using our data. However, the question is: have we done the right thing with our data? As banks become telecoms and technology companies, and telecoms and technology companies become banks, only the companies that have the most intimacy with customer data, and use that data the most intelligently, will win.
AT A GLANCE Chris Skinner is an independent commentator on the financial markets and fintech and the voice behind the Finanser.com blog. He is author of the bestselling books Digital Bank, ValueWeb and Digital Human. His latest, Doing Digital: Lessons From Leaders, is published in 2020. He is chair of The Financial Services Club, and Nordic Finance Innovation, as well as being a non-executive director of the fintech consultancy firm, 11:FS. WEBSITE: chrisskinner.global TWITTER: @Chris_Skinner www.thepower50.com