The impact of smartphones on financial services is phenomenal. And from the wave of other connected devices we expect even more impact.
Smartphones and connected devices give insurers an unprecedented entry in the lives of customers, to become always part of life. Thanks to mobile, insurance carriers can now accompany their customers wherever they go. For customers, mobile is already an obvious part of the experience for any type of service; including insurance. It makes mobile not only suited for routine actions, but also to introduce new conversations to nurture the relationship.
Other connected devices assist customers where they spent much of their time; at home, at work, in their car. All these devices give the opportunity to be close to customers and become part of their daily lives, right where it matters most; offering additional indispensable services that really support their everyday life. Insurers should launch applications that engage with customers on-the-go, that wave self-tracking through daily life and that provide new ways to empower customers and to support in self-improvement; in financial, physical and mental wellbeing, including protection, safety and security.
Great opportunities. But it doesn’t automatically mean that these opportunities are easy to seize.
On the one hand, people like to have a sense of control. That is why they value apps that give instant answers, provide convenience and empower them – tailored to them, based on data. On the other hand, customers become more and more aware that when an app is free, data is the currency the payment is made in. People have started to realize that they provide and look at the data, but that someone else owns the data, and can use it for other purposes. And many consumers are not too fond of that. This is the privacy paradox.
The increased use of customer data means fresh grounds for concern over privacy. Most consumers are uncomfortable about sharing personal details with large companies in general (and financial institutions such and banks and insurers in particular).
The following five strategies help to solve the privacy paradox.
1. COMPLETE TRANSPARENCY
To a lot of customers ‘Big Data’ equals ‘Big Brother’. And all too often they are not wrong about that. We believe privacy is a fundamental right. Obviously, insurers need to manage concerns that many consumers have. It has to be clear to customers when, where, how and by whom data is collected, processed, saved and used. Moreover, customers should be able to decide which data can be used, and for what. And they should at least be able to delete data. Insurance carriers have to be completely transparent about what customer data they have and what they do with it. That means that they have to make the customer aware of the advantages but also the disadvantages. Once they have accomplished that, customers should consent actively to the use of data. But they should also be able to stop financial institutions using it. In the end, the data belong to the customer.
2. LETTING CUSTOMERS FAMILIARIZE THEMSELVES
Insurance carriers, and financial institutions such as banks as well, will have to let their customers get acquainted with the fact that they are using their data and, moreover, with the advantages of data use. They never made this clear. And they have to be patient; familiarizing customers bit by bit. By having customers actually experience a new added value, a financial institution can nurture trust in the use of data, and can speed up information exchange, while at the same time creating value for the customer.
We believe reciprocity is the answer. Most of the data collected by financial institutions in the course of the relationship with customers is not given back in terms of information. If a bank or insurer is striving for a transparent relationship and of creating value to customers, it should return information in a symmetric way; information that is assisting the customer. If a financial institution were taking reciprocity as an important point of departure, this would of course improve the nature of customer relationships. We believe consumers’ perceptions about the use of data by banks or insurers will flip if these institutions use the data to put customers in control and offer something meaningful in return. Consumers are in fact quite willing to surrender a little bit of privacy if the advantages they get in return are attractive enough. These can be relatively small benefits, like saving time, improved service and more personalized experiences, or the opportunity to benefit from specific services or offers with a larger financial value.
4. GIVE MORE THAN YOU TAKE
In reality, financial institutions should aim higher. If financial institutions ask customers permission to use their data, they should feel obliged to come up with surprising insights and applications that are obviously based on that data. It's all about giving more than you take. The added value financial institutions deliver based on consumer data should be perceived as bigger than the cost of handing over privacy in return. They should combine things the customer cannot combine themselves and/or that customers would never think of.
5. GIVE CUSTOMERS SUPERPOWERS
Financial institutions should aspire to give customers superpowers with all the available data. Think of the impact of search engines, making all kinds of information available to consumers almost immediately. Of Google Translate and speech-to-speech language translators that free you from having to learn foreign languages. Of GPS car navigators helping you find your way without knowing your way, of apps that with the help of all kinds of sensors help the blind to move through a city or a building they've never been to before, and even recognize passers-by. Or of 3D-printers that enable consumers to produce their own products. In the years to come we will see if banks and insurers can give their customers these kind of superpowers.
Read more in our latest book. Available in English, in German, and soon also in French.