As banks use data matching, influencers and targeted advertising, what are the legal and commercial practicalities?
Banks and financial institutions are increasingly exploring new avenues to deliver bespoke marketing and improve consumer engagement. Much of this has been driven by pressure on traditional financial institutions from challenger banks; a drop in traditional television consumption in favour of digital, on-demand content; and the move away from in-person banking.
Throw in the Covid-19 pandemic, and it is possible to see how banks and traditional financial institutions have been encouraged to modernise advertising and marketing practices. But this is by no means an easy feat. Questions remain over what some of the ‘next-generation’ digital advertising trends will look like in the banking sector, and how these may be affected by the legal and commercial practicalities.
Targeted marketing
Banks are increasingly harnessing the power of their data through advanced algorithmic analysis of both structured and unstructured data to pinpoint customer behaviour. Collecting these consumer insights helps banks to tailor and target their ads more effectively and increase profitability as a result of higher conversion rates. Chime, a US neobank, has focused a major part of its social strategy on Facebook, delivering bespoke ads to demographics it has concluded — based on data analysis — are more likely to sign up.
While the benefits of targeted advertising are clear, it is vital that banks ensure that they are striking the right balance from the consumer’s perspective between the perceived convenience of targeted ads and growing concerns around the misuse of personal data.
Data matching
With these concerns in mind, it is also worth focusing on the way in which data-matching services combine advertiser and platform/publisher data to create a feedback loop in which new data continues to refine and improve the accuracy of ad-targeting, allowing for greater precision in targeted marketing to specific audience segments. UK bank TSB’s recent collaboration with Channel 4 on the “Life made more” campaign made use of data matching by overlaying TSB’s first-party data with Channel 4’s video-on-demand viewer data to pinpoint whether viewers who have watched TSB ads go on to purchase TSB products.
The question this raises represents one of the biggest concerns in data-matching partnerships. It is around data ownership, with a particular focus on ensuring appropriate contractual protections are in place to delineate and protect each party’s respective first-party data sets, while enabling either one or both of the parties to exploit the new data arising from the partnership.
Influencers
In an effort to stand out, banks are now starting to realise the potential benefit of influencer partnerships and endorsements, where campaigns range from sponsored Instagram posts to YouTube videos. American Express (Amex) has run several influencer-led campaigns, including the promotion of the Amex platinum card by working with top Instagram influencers whose values and lifestyles align with the Amex brand.
Banks are just starting to realise the potential benefit of influencer partnerships and endorsements
Although the effectiveness of engaging consumers through interactive and personal content is attractive, the use of influencers raises some important legal and practical considerations in an area as heavily regulated as the banking sector. Due to disclosure requirements and restrictions around financial promotions, institutions should ensure that their influencers properly understand and comply with the relevant restrictions and requirements.
Banks should also vet influencers in order to understand the demographics of their online followings — and therefore the regulatory regimes that will need to be considered — and avoid any reputational issues for the financial institution. Failure to do so can have negative consequences for brands, as the UK Advertising Standards Authority made apparent recently when it took issue with the way some influencers were promoting brands on their channels.
Tech outreach
As high-net-worth individuals increasingly integrate digital technology into their everyday lives, wealth management institutions are having to play catch-up in order to remain attractive. Of course, wealth management is an area in which human interaction remains important, and so wealth management companies are having to adopt a hybrid model that retains human interaction with a digital underpinning, for example, through robo-advisors (online platforms that apply smart algorithms to provide personalised advice, with the option to transfer the customer to a human when required). In this way, firms can provide scalable, affordable, always available advice, while minimising human capital and operational costs.
Banks and other institutions looking to make use of these types of technologies should ensure that compliance teams are involved at the outset, as there has been an increasing amount of regulatory scrutiny around the use of automated decision-making and chatbots in recent years.
Regulator scrutiny
It is clear that this trend of increasing digitalisation in the banking sector is still in its infancy. The regulatory landscape, particularly as it applies to banks and other financial institutions, will continue to evolve. As it does so, the spotlight will shine even more brightly on the potential harms that can befall consumers, increasing regulator scrutiny on the digital ecosystem. The banks that recognise this will be the ones most likely to successfully address the challenge of digitalisation.
Hayley Brady is UK head of media and digital at law firm Herbert Smith Freehills.
