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Is a Big Data Backlash on the Horizon?

Posted by Dave Uhryniak, financial services research leader, Deloitte Services LP, on July 30, 2013

American consumers have trouble swallowing any attempt to infringe upon their privacy. Haven’t many of us recently considered how much of our personal information is actually private? 

In today’s world, most consumer actions leave a trail and create data. For example, today I logged onto my computer and responded to email. Later, I will go to the ATM, and then I’ll use my debit card at the grocery store. I will have my smartphone with me, so I can be located at any time. Each action creates data that allows my steps to be traced. There is no getting around it, consumer data is everywhere. 

In financial services, the combination of consumer data and advanced analytics is likely considered necessary for effective consumer engagement. Management and their advisors might in turn expect consumer data and advanced analytics to increase profitability. However, pursuing greater profitability by gathering and analyzing consumer data could present the risk of being perceived as too invasive. It is conceivable that some consumers could tire of having private information analyzed. When that happens, will the backlash begin?

What would a big data backlash look like? Perhaps it could involve customer migration from larger financial institutions to smaller financial institutions. Shop at a large retailer and chances are your movements are being tracked via your cellphone. Soon facial recognition software will identify you as you enter a store.1 Consumers trying to avoid being big data fodder may choose to transact with smaller local or independent providers. The backlash could be a resistance to using new technologies, such as mobile financial services. If you are trying to avoid leaving a trail, so the thinking might go, avoid mobility. Or it could be an increase in complaints to the Consumer Financial Protection Bureau (CFPB) database, which in turn could lead to further regulatory restrictions against consumer data usage. The CFPB has proven eager to respond to consumer complaints and investigate issues where there is a cause for concern. A backlash could be a combination of these situations or something not mentioned. If one supposes these to be potential reactions, perhaps financial institutions can effectively allay consumer privacy concerns and avoid a potential backlash. 

Consumers know their personal information is out there—it really can’t be avoided. If given a voice in how their data was used, would consumers find it tolerable? Perhaps allowing consumers to make an active choice to participate can create more transparency. For example, Barclaycard Ring engages consumers in all aspects of card development, from card designs to interest rates to late fees. The result is a consumer-friendly card with relatively low rates2 and recognition for its admired social marketing program.3 Sure, Barclaycard Ring tracks and analyzes personal data.4 But card users don’t mind because the use of their data isn’t perceived as intrusive. On the contrary, the benefits are perceived to offset the invasiveness of the data analytics.

Making consumers aware of data analytics benefits may help financial services avoid a big data backlash. Every day, consumers hear about the risks of data analytics without an appropriate understanding of the benefits. This combination can create negative attitudes towards the technologies. Consumer misunderstanding might minimize the opportunities of advanced analytic capabilities, and would likely slow development of more personalized products and services and limit potential profitability.

Analytics are reshaping how the financial industry interacts with consumers. The amount of consumer information is likely to increase and analytic capabilities can advance. If financial institutions avoid negative consumer sentiment, they may harness the information to improve the consumer relationship and in the process, increase company profitability. What do you think? How can the industry leverage consumer analytics without infringing on privacy and potentially losing a customer base?

1 National Public Radio, July 21, 2013, “High-End Stores Use Facial Recognition Tools to Spot VIPs”, Brenda Salinas
2, as of July 18, 2013, the average U.S. variable card rate was 15.31% vs. the Barclaycard Ring, interest rate of prime plus 4.75%, or 8.0%. 
3 Lithium Technologies, 2013 annual Social Customer Excellence Awards, Barclaycard Ring best social marketing program
4, annual report, privacy policy, and website information

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