Data monetization can be a source of great, even immense, value for financial institutions. However, improperly handled data monetization can run afoul of government regulations and cause headaches that are just as big.
Randy Koch, CEO at ARM Insight, says that banks with successful data monetization programs gain a big edge over their competition.
Here is an excerpt from a report on monetizing consumer data from PYMTS.com:
The first step to successful data monetization, Koch explained, is to have a successful data strategy. Early on, that means “embrace the regulations. It doesn’t matter if you like them or you agree with them. You have to embrace them and understand they will change over time.”
Those strategies can run the spectrum. That might be an “external” strategy that simply involves selling data to a third party that does not compete with the FI — say, a fast-food operation that wants to better understand the food-buying habits of younger consumers in the morning. An “internal” data monetization strategy involves “using your own data to create new products or revenue streams with existing customers,” Koch said.
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In Koch’s experience, most CEOs in the payments and financial services space know “inherently that their data is value, and the risk that comes with it,” but still need help “safely monetizing the data” and conducting the first steps of that process. Many executives tend to start with synthetic data — which, he said, “can be monetized more quickly, even within six months” — before moving on to strategies that involve using higher-risk, higher-reward anonymous and raw data forms.
Doing so, however, typically requires a “conversation” that involves multiple people within the organization — a group that includes compliance experts, the chief data officer, the chief technology officer and other executives. Among the goals of that conversation? To drive home the fact that “data is not the boogeyman if you craft monetization strategies correctly,” Koch said.
Data can be as — or even more — powerful than oil, but there is more to monetizing a lucrative commodity than simply having access to it. In the case of monetization, the data needs to be taken from its silo and “refined,” Koch said, and all those other steps have to be done. However, if the risk can be managed, and the goals set and achieved, he emphasized that the upside of data monetization can indeed be tremendous.
