RetailTech is coming, and this is how it will change retailPosted: May 31, 2016 Filed under: English | Tags: Banking, Big Data, Consumer, Digital, Fintech, Retail, Retailtech, Technology Leave a comment
Not very long ago, companies started to create Business Ecosystems, also called Platforms. They relayed on a core system or product, defined a series of working rules, and then opened the whole to third party companies to build they own products or services, on top of the core capabilities. Microsoft Windows is a platform, as it is the Apple App ecosystem. It’s a fantastic way to foster loyalty to Apple phones, thanks to the effort, investment and creativity of third party developers that, in return, can make money (sometimes a lot of money). This is why it’s called ecosystem, because everybody lives (or dies) in symbioses, for the greater good, particularly the one who owns the platform. Getting traction is not always easy, but once a critical mass has been reached, there is a lot of potential benefit for all the parties. Apple alone wouldn’t be able to build all those apps alone, both from the economic and the creative point of view, and Rovio wouldn’t be able to reach such a large audience for Angry Birds without the App Store.
In this constant changing world, few industries aren’t being disrupted or somehow will be in the near future. If taxi drivers think Uber is the threat, it’s because they don’t think self-driving cars are happening soon. If insurance companies think they can still make money insuring car drivers, it’s because they are having drinks with the taxi drivers. High regulated industries are the ones that one might think the most difficult for disruption and, one after the other, are being disrupted in one or another way.
It’s happening with banking. I’m sure you have heard about Fintech, an “economic industry composed of companies that use technology to make financial services more efficient”. As banks have been opening their services to the final customers via digital means, Fintech companies have been able to “connect” to these services and set up an overlay that adds value to them. Initially banks didn’t like the idea that third party companies made money with their clients, because it was money they were not making and that, for a bank, is close to sacrilege.
As in any disruption process there are a bunch of gurus predicting the destruction of banks as we know them, and the advent of a new, peer to peer, financial model.
The “Uberization” of banking was a matter of time. (If I could get a Sri Lankan Rupee, (LKR) every time somebody uses the term Uberization, I would be rich by now). But banks are too powerful for that, also because in a way, they are a necessary part in our financial system while the capitalism model keeps in place. Maybe banks should approach the problem with a new perspective. If Fintech companies are trying to make money with my clients, let’s build an ecosystem, and help them do it, because if I enable more added value services for my clients, they will stay loyal longer, they will buy an iPhone next time.
Banks are huge generators of customer data, Fintechs can use it for creating new products and services.
BBVA, the global bank with presence in over 35 countries and with 66 million customers, recently launched the BBVA API_MARKET. Covering Spain and the United States for the moment, the market provides a collection of APIs (a standard language for communication between machines’ processes), that will allow Fintechs to connect to the bank customer data and offer services on top of the BBVA core banking system. With the client permission, a Fintech app could request the BBVA API to retrieve his credit card movements, and offer recommendations on how to save more in their everyday purchases. BBVA is setting the foundation for creating an ecosystem, inviting other companies to work for them, make money and service their clients in ways they would probably never imagined. Smart.
If you remember the title of this post, at this point you have probably guessed what’s coming next. Retailers are, as well as banks, great generators of consumer data. Retailers have, as well as banks, a long history of brick and mortar business. Retailers are, as well as banks, slowly moving to opening their transactions through digital channels. Third parties are, as well as Fintechs, starting to connect to the retailers’ digital services.
What if retailers could structure their customer information and expose it through an API marketplace to third “Retailtech” companies?
It might not happen tomorrow, as it’s not happening in all banks yet, but retailers will build their own data ecosystems and expose them to third parties, because it could be the way to catch up with the pure players, that are more flexible and quick to react in providing many of these new services by themselves. How aboutanalyzing your buying patterns and plan recurring purchases? How about an app that could make your online purchase easier, with intelligent recommendations? Why not to open the retailer’s eCommerce so third party could place orders on behalf of registered users?
Retailtech is coming, an industry of companies that use technology to provide services on top of retailers data.
In return, what is in the retailer’s interest by building a customer data ecosystem? First of all, more loyalty from their customers, which would receive extra services on top of the core business (like the iPhone and their apps). Second, a source of information from FMCG companies, because, why not, these Retailtechs could also service them in their constant need of customer insights, helping both building the business. Third, at some point this data sharing business via an ecosystem could be a non-negligible source of revenue. Apple gets 30% of every app sold in their marketplace, imagine a 1 LKR cost per transaction retrieved, and now think on how many transactions the retailer processes per year.
On the other hand, there is a risk for the retailer when transparently exposing its customer data. Transparency means benchmarking, and sometimes benchmarking isn’t good when customers compare prices and offers directly in their smartphones. But again, third party companies are finding the means to gather that information with or without the retailer consent. Insurance companies didn’t want to share their prices, and comparison webs found the way to do it, so they finally exposed them in a structured way to be sure the consumers always had their best updated prices also in those sites.
It’s not the Uberization (+1 LKR) of Retail, it’s the “BBVAtion” what could really disrupt the retail landscape, and seeing how things are going in banking, this will happen in retail sooner rather than later.
PS: All my respects to Sri Lanka, a country I’d love to visit at least once in my life.
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