Big tech knows you better than your bank does
RBC CEO flags risk of rivals getting to clients first
TORONTO Big technology companies and their interest in consumer data could pose a risk for Royal Bank of Canada, the lender’s president and chief executive officer suggested on Friday.
In the past, Dave McKay said, RBC would be among the first to know about significant life events or business changes with its customers. But today, he said, a consumer’s intentions are coming to light through their social media and search patterns, which are ripe for harvesting by the major technology companies.
“This means that our newer competitors — the big players in search, in social media, in e-commerce — can quickly pick up on these data cues,” McKay said during a speech at RBC’s annual meeting of shareholders in Toronto. “As these technology players realize their digital dividend, there is a risk that our visibility with clients will diminish in the networked economies — or ecosystems — of the future.”
Speaking with reporters after his speech, McKay expanded on what sort of risk this poses, bringing up the tracking and sharing of consumer browsing patterns with potential merchants. According to the CEO, RBC is preparing for a world where other businesses see what would-be customers are doing before the bank does, and can thus insert themselves between the bank and its customers.
“If it’s a financial service, what’s to stop them from making that offer before you’ve even come and told us you want a car, you want a mortgage, you want to buy a washing machine, you want an increase on your credit card to do that?” McKay said. “You’re broadcasting to the world what’s going on in your life and what you’re interested in. It’s not hard to deduce what the financial need from that might be at the end of the day.”
While there is no issue yet for RBC, Canada’s largest bank by market cap, McKay said he wants to make sure it doesn’t become an issue.
“You think about someone getting between you and your customer with that information and starting to influence the customer to choose different providers,” he said.
“And therefore, you want to go back to a world where you have a deep enough relationship with a customer that they have an incentive to tell you because they trust you, because you provide them with great service, but also because they think you’re the most relevant provider for them going forward.”
The remarks came amid the scandal that has struck Facebook Inc., which has come under fire after it was revealed user data may have been shared improperly with a political consulting company. The comments also followed a fine levied by the European Commission against Google over allegations the company was using its dominance as a search engine to favour its own comparison shopping service.
RBC’s is not the only bank CEO pondering the intentions of Silicon Valley. Bharat Masrani, chief executive of Toronto-Dominion Bank, said after his annual shareholder meeting that he does have some concern about “non-traditional competitors.”
Technology has also become a bigger part of the banking business in general. RBC is investing in artificial intelligence, which along with machine learning, is “the most significant force of change” affecting the relationship between the financial services industry and its customers, McKay said.
McKay also said embedding financial products such as credit cards in apps like Uber, where the decision to register it as source of payment is made once, leaves a customer thinking more about the app’s brand, and less about the bank’s brand.
RBC still has some crucial assets in its home market, the CEO said during his speech, such as a trusted brand and its own secure data advantage. The bank also reported an $11.5-billion profit for 2017, up 9.7 per cent from 2016. “We have identified a number of ecosystems — those digital spaces where our clients live and work — where we believe we can play an integral role in their future,” he told shareholders.
Data remains a tough subject for the banks, and McKay said that RBC’s will not be shared with anyone outside of the “bilateral” relationship with a customer without explicit consent. He also said that being upfront and transparent with customers was “mission critical.”
“If you’re misusing data and you’re not relevant to a customer and you’re creating noise, or spam as some people say, then I think you destroy trust, increasingly will destroy trust, with the customer,” McKay told reporters. “We will not burn our brand on this.”