“It’s being used as political capital … when you want to get mob interest, you turn on the banks. Hitler did it” – Mike Smith
This article on former ANZ CEO Mike Smith has been on my mind for a few weeks. There’s a lot in it that could annoy a bank customer or shareholder.
Take, for example, the issue of the expansion of ANZ into Asia under Smith. Maybe it was a genius move. Maybe the strategy was unnecessarily risky and likely to fail from day one. We certainly thought the latter, ex ante.
Afforded an opportunity for contrition, he mentions the rising ‘cost of capital’, ‘protectionism and nationalism’. Nothing about unforced errors. Nothing about the consequences for shareholders. Clearly ANZ in Asia was a brilliant idea knocked about by the unforeseeable shifting sands of time.
“Ten years ago it was a very different regulatory environment: the cost of capital was very different, cross-border is much more difficult to run now and that falls into line with growth in protectionism and nationalism” – Mike Smith
Or what about the discussion about the ‘mob interest’ in the big banks. Toeing the line of all current and most former big bank CEOs, the banks’ problem here is one of PR and political posturing. None of the popular angst relates to the banks’ actual behaviour towards its customers and staff. If you are a politician and you ‘turn on the banks’, Smith feels justified mentioning you in the same paragraph as Hitler, although I’m sure he didn’t mean to infer.
What annoyed me most, however, was the quite accurate insight Smith provided into the future of banking. The one revolving around big data.
Banks chasing the tech giants
There’s a saying in the tech world, if you’re not the customer, you’re the product. We might not have known it back when we signed up for Facebook or first started googling, but it’s well documented now. These big tech companies get to know us intimately, then use the information to sell us crap or sell that information onto third parties to do likewise.
It might have started in Silicon Valley, but they’ve normalised the behaviour for everyone else. Big data is a buzzword on the lips of every CEO in the world today. And the big banks want in. According to Smith:
“The thing that people forget are the normal transactions services that banks provide. The key, I think, to the future is really unlocking the data that they hold and using it much more effectively and much more efficiently. And they’re all on that case, ” he said.
“So there’s still, I think, plenty of room for growth, there’s still plenty of room for efficiency and productivity increases. I think technology allows the relationship model to really improve, and the quality of information that your customers get is going to get better.”
Through ‘third party partnerships’, Google already captures around 70% of debit and credit card transactions in the US. It’s not enough that they know we are in store through our Android devices, they want to know what we’re purchasing too, even when it’s ‘offline’. And they’re doing it by buying that information. We don’t know the details, those third parties could include retailers, card companies, banks and various middlemen. But someone, somewhere, is selling our information. Big data behaving like big brother.
Know your customer
When big banks talk about ‘unlocking the data’ they hold, it’s going to come with a façade of knowing you better so they can serve you better. But make no mistake, in future the banks will consider you both customer AND product. That information will be used to target your weaknesses, err needs, to sell you stuff directly and quite likely sell that data to others as well.
The big bank CEOs think they already have a PR problem today. If they abuse our trust here, just wait and see how much more we’re capable of hating them in future.
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