What it takes to innovate AND stay safe.

Hello, Customer Experience? Retention Here.

If you’re my client, dealing with me on-line, anything that frustrates you impacts your experience, and potentially your desire to do business with me again.

When I went to Russia last year – I really appreciated having Uber as an option. I could upload my credit card to their (hopefully) secure system and give directions and pay without language barriers or risk to me. Easy peasy seamless trip to the Hermitage. I wish the lineup to get into the museum had been even a fraction as effortless.

But when I rented a summer vacation spot through AirBnB, I still had to exit to Paypal to complete the transaction. I didn’t mind, I’m still newer to AirBnB. As a buyer I have absolutely NO way of knowing whether any given site is secure (or a scam) – and having the platform direct me to PayPal, which has earned my trust, gives me some comfort.

Transactional friction is a consequence, therefore, of trust creation.

How much do you trust that service/business/platform with your valuable personal information? The number of companies who had security breaches in 2018 alone, is staggering. A global expert in this field, Gemalto, reported in the first half of 2018 that there were over 4.5 billion data records compromised.

Yikes! there are only 7.6 BN people on earth!

In 2018 reports came out showing the level of intrusion of every day software and applications into our personal lives. From Facebook to phone games, these apps are tracking our location and accessing our phone’s cameras and microphones. It’s an urban legend that rings true. (haha, smartphone joke)

I’m not a Luddite – I have a phone and I use location services to my advantage.

But….you know. It’s kind of creepy, that they know everything I do, and where I go. No, I haven’t read the 14 pages of fine print that come with the app, so I guess it’s my fault. I guess I could always delete Facebook…….

Except, of course, if I buy a new Samsung phone on which I CANNOT choose to delete it. 0-o

Let’s face it, we’re not going to go back to rotary phones.

But we DO need to balance protecting our private information against the very real need for elegance in our business dealings that will drive that wonderful, seamless customer experience.

There’s a company I know that has launched a super-connected application, giving consumers access to a ‘neutral’ credit scoring agency with data right on their phone – The tradeoff? To gain that credit behaviour data, the consumer gives the agency full access to their behaviour and data inside their smart phone.

(Shrug). You gotta pay to play, right?

Your feeling about this is likely based on your age; my generation (ahem, not telling) is generally more suspicious of this access. But imagine you became one of the customers of these global companies whose data were compromised.

It’s only fun ‘n games until someone loses a (virtual) eye.

Finance is the game of borrowing low and lending higher, to a predictable, paying borrower.

Getting to a fine balance between borrower and lender is a little daunting. Hmm. Maybe why Polonius (from Shakespeare’s Hamlet) told his son “neither a borrower nor a lender be”.

As a borrower, you want secure but flexible lending, from a reliable lender, at competitive prices. Aye, and therein lies the rub.

Aside from balancing ease of use with adequate data security, there are some other challenges.

  1. Borrowers need flexible lending, but lenders need predictable borrowers.
  2. Borrowers want to give less collateral and have lenders take more risk. Lenders can, but at increased prices.
  3. Borrowers want to give less data and get more for their money: Lenders need more data to reduce risk and keep prices low.

So, why don’t we just AirBnB the finance industry?

By creating mutual transparency through a public ‘review’ system, finance could keep risks down and predictability high – giving borrowers low cost and lenders high reliability. Perfect!

Sesame Credit – an AliBaba JV with the Chinese government, is doing just this. Having the competitive advantage of a kind of data monopoly, they are using that to create a “social credit’ business, where how you act in society impacts the price you pay for, and that access you have to, things that you want in society. Didn’t pay your parking ticket? No soup for you! (or, more expensive soup).

It’s the Big Brother Orwellian future that we used to fear. Just who will decide what constitutes ‘good citizenship’ and therefore access to capital? But it seems that we are opting in to it, for the sake of convenience and to get something that is valuable – faster, simpler access to cash.

There are other factors that slow down innovation – like public regulations, lending policies and oversight, put in place to protect you and I as borrowers.

Lenders know that there are still a lot of borrowers who overestimate their success and underestimate their risk. The lending community doesn’t want people to fail – no one wins in that case – and more information could actually help lenders help borrowers more proactively. Imagine that you got a text from a lender telling you that you didn’t have enough funds BEFORE the payment bounced. Friendly finance – a true partnership. Win-win.

Thieves lurk in the shadows.

One of the biggest drivers of cost in the finance world is fraud. This occurs because the platform that reports the trust is member/user driven, not publicly driven, and is NOT an AirBnB or Uber style of transparent data sharing. These platforms DO help you sift out the duds from the indubitables, but don’t solve all the problems in a super transparent way.

Maybe in order to effect a real evolution of lending, the opacity of information between the lender and the borrower HAS to go away. But we’d have to be ok with the fact that the lender in that world, might see where we go on holidays, and what we spend our money on, instead of making our loan payment.

In a fully transparent world, we can eliminate fraud, reckless behaviours, unethical business practices. Fraud represents billions of dollars in losses to the financial industry every year – identity theft alone costs Canada 1BN per year. Fraud drives costs up for the rest of us.

Transparency conversely protects borrowers from reckless, unethical lenders. Can I tell you some stories about that? Yup. Unfortunately, too many. An entirely different blog – or maybe over a glass of wine or coffee.

If Fintech is the future, we must all ask critical questions about implications for borrowers and lenders.

I believe FinTech really is opening up a new frontier, the way the early Maximizer database opened up one for me as an account manager back in 1986. (yup, on my Zenith luggable laptop with the 20MB hard drive).

Where will we end up? When publishing houses (like Entrepreneur magazine) put up a lending shingle, and office supply chains (Staples) offer instant business loans up to 300K (at rates topping 20-30%) should borrowers wonder about their expertise, and motivation? Is it to provide a great lending environment and experience, or to monetize their database and platform? And, does it matter? If data that allows you to predict behaviours is the ultimate lending decision tool, then maybe Facebook is the next global bank.

I think change will come on both sides.

Borrowers can have their cake and eat it too. But only if the lenders can continue to access quality cake ingredients – and only if it’s still worth it to make cake.

Until then, Marie Antoinette’s got nothing on good old fashioned piggy banks, at least until them pigs can really fly.