Aidan Millar
Aidan Millar, chief data officer of DNB Bank, explains to Chris Evans how technology and customers are transforming the financial services landscape.
A conversation with Aidan Millar is an enlightening, scary and fascinating experience. In the space of an hour we touched on several topics, including hedge funds using satellite data to predict the future, Google’s global dominance, and Donald Trump’s fake voice. We will get to that later, but first, Millar has important advice and insights for financial service firms. Particularly the incumbent banks that he insists have been “lazy for too long, but need to adapt or just become utilities”. He refers to four main vectors affecting financial services.
Customer interaction
The first of those vectors is customer interaction, which Millar asserts has gone beyond what has been done by incumbent banking institutions. “The likes of Amazon, Facebook and Google have set new standards of customer interaction where everything is catered for at the touch of a button,” says Millar. “This has empowered customers and made them more demanding. The younger generation particularly don’t have allegiances or tie-ins to particular brands any more. They’re very agnostic about who provides the services, they just want the best, fastest and often cheapest service available.”
This is translating to the banking landscape where challenger banks and fintechs are stealing the limelight and customers from the incumbents, who need to react fast and smart.
Millar cites the example of Marcus, the new digital savings bank of Goldman Sachs. “This aggregates customers’ bank account details into one platform and offers incredible savings rates of around 2.5%,” he enthuses. “Customers can literally transfer all their money from say Bank of America into Marcus with one click.”
He insists customers are becoming far more fickle. Some baby boomers and older millennials still cling on to their long lasting relationships with banks, but they’re dying out (literally and metaphorically). “The next generation of customers just want to be surprised and delighted,” he says.
Decoupling
The traditional, incumbent banks are not stupid. They’re fully aware of these changing customer needs. The difficulty is handling cumbersome legacy IT systems, which is the second vector.
“Many banks have grown through acquisitions but, without rationalising their infrastructure, they’ve just added complexity. As a result, they’re now working hard to simplify their technical debt, but they’re struggling. HSBC is a good example. They’re spending billions trying to rationalise,” Millar explains.
But he insists it is possible for banks to deal with this debt by “accepting they’ll never get rid of it”. Instead, they need to build a capability where they can decouple themselves from it. That is where data comes in.
“Most banks have all of these applications that are basically data silos,” says Millar. “Thousands of them. They need to figure out ways to consume and analyse that transaction data, primarily by building a single view/record of the customer across the data silos, and then they can do what the fintechs are doing. Even take it to the next level of customer service, as they’ve got the advantage of more data than the challengers.”
Regulator response
Regulators are the third vector. Their impact is huge for banks. As well as dealing with all the technical data, banks are having to remain compliant and handle the influx of regulation. But he insists this is a good thing.
“If you look at BCBS 239, which is about risk data aggregation and risk reporting, it basically says you’ve got to explain where your data is coming from, how it flows through your organisation and how it is consumed. Why would you not want to be doing that?” he laughs. “It’s common sense. The General Data Protection Regulation is the same. Of course, you should be dealing with customer data carefully. It is not about stopping you from sharing customer data, but about protecting it and making sure customers are aware of what you’re doing with it.”
This ties into open banking, which was pushed through by the regulators. “Banks are wary of it,” says Millar. “They know they’re going to have to open their systems and some are already testing it. But they didn’t push for it and so they’ve got the mentality of someone else can go first.”
The challengers
In the meantime, Google has acquired an EU e-money licence under the second payment services directive, meaning it can now offer payment and finance solutions to consumers and businesses across the EU.
“They can now approach the banks and say: ‘Where’s your open application programming interface (API)? I’m going to build an application on top of that now’,” says Millar. “It’s easy to build a bank using open banking APIs and aggregated technology like at Marcus.
“They can then ask the customer to put in their account and password, and use an open API to get their transaction balance in a mobile format.”
This only further serves to illustrate the importance of banks re-connecting with their customers using analytics and insights, otherwise they will simply become “utilities, servicing the needs of others”.
The challengers and fintechs are designing their whole business around the customer. They’re becoming like eco-systems. “Look at Amazon and what they’re doing. They’ve got the whole life cycle of a human covered. They know what they eat in the morning, what they like to watch (Amazon Prime), what they need (Amazon Echo and Alexa), and generally what they buy (Amazon website).
“They’ve got all this data on you and they’re building a hyper insightful profile of you. It’s not just demographic information, but also psychographic insights. It’s what Facebook and Cambridge Analytica have been using to exploit/influence individuals to behave in a certain way. It’s scary.”
Ethical data
Millar delves into the ethics of all this data gathering, wihch is the fourth vector. “I often tell the story of the industrial revolution moving from steam to mass production and then to the digital age,” he explains. “Now we’re moving into the next generation where technology and the convergence of sciences are overtaking the capabilities of the human race to use them in the right way, ethically.
“We are humans – simple animals – we’ve adapted to technology to use it to our benefit. But now it’s taken over our ability to consume it. Artificial intelligence (AI) is a good example. There is AI technology that can take a visual of you in real time, overlay your lip movements and what you’re saying, and make it look like Donald Trump is saying it, in real time. Put that on social media and it’s fake news on a different scale.”
Plus, Facebook’s research and hardware lab, formerly known as Building 8 and now comprised of Reality Labs and Portal Groups, is constructing what it calls a “brain-computer speech-to-text interface” – technology that’s supposed to translate your thoughts directly from your brain to a computer screen without any need for speech or fingertips.
In the finance world, Millar points to the hedge funds and asset managers who spend billions of pounds on their own satellites, which they send up to space to gather information about commodities and service providers.
“They no longer need to wait for quarterly reports, they have data companies, with NASA specialists, assessing shadows on oil tanks to monitor levels and they keep track of numbers of cars at retail car parks. These are macro-economic indicators. It’s staggering,” says Millar.
This goes back to the platforms and challenger banks. “If they can augment all the financial transaction data with other data to get a holistic view of what customers are doing, the possibilities are endless,” he concludes, before rushing off to a meeting with an ex-Cambridge Analytica data specialist.