Digital Banking Wants to Be Less Big Brother, More Like Spotify

The digital services banks currently provide are not valuable enough to offset how apprehensive people feel about these financial institutions using their personal data, said Michal Kissos Hertzog, CEO of Israel’s Bank Leumi’s digital banking service Pepper. Speaking at Calcalist's Mind the Data conference, held Tuesday in Tel Aviv, Kissos Hertzog highlighted some of the ways companies of various industries utilize user data, and the dynamics of user collaboration—or lack thereof. The conference is held in collaboration with Bank Leumi and accounting firm KPMG. 

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"Everyone in Israel uses Waze," Kissos Hertzog said, referring to the popular Israeli navigation app acquired by Google in 2013. "Waze saves me time, and I don't care that it knows my location and my schedule, and that it listens to me through voice navigation. It gives me value."

Services like Spotify and Netflix receive the same approval from their users because they use the data they collect to give users better-personalized content, she said.

In Israel, 91% of the Y generation uses banking applications, Kissos Hertzog said, but even so, when banks use that data, it is a red flag for some customers. "I know the bank knows that I used my credit card at 12 a.m. last night—but that doesn't mean I want the bank to use that information," she said.

According to Kissos Hertzog, the reason for this double standard is the value banks generate from user data—this could be optimization of banking plans or actions that could reduce banking charges or interest rates, Kissos Hertzog said—is not perceived as a valuable tradeoff. People are not interested enough in financial education to sign off their personal data, she said. "People like to use and spend money, but they don't like to manage it."

That's why the banking industry needs to start offering the services people are looking for—those that will save people the time and bother of managing their accounts, she said. "If I'll notify people in advance when they are going to be short on money, for example, if I'll preempt the things that customers will need to deal with ahead of time—that's when we can really use data to provide our customers with value they'll want."