Evaluation of customer data: cooperative banks wrestle with data protectionists

Frankfurt In view of more online banking and fewer branch visits, the cooperative banks jump on the trend towards data-driven customer contact and set up their own data company. According to their own statements, several companies that belong to the DZ Bank, the leading cooperative institute, and the IT service provider Atruvia are currently investing more than 20 million euros. The company, whose name the owners will reveal at a later date, was founded today, Tuesday.

According to Hans Joachim Reinke, head of the cooperative fund company Union Investment, the core idea is “that we remain in dialogue with customers in an intelligent way, increasingly digitally”. Around 40 percent of the approximately 30 million customers with a current account currently conduct their banking transactions online at the Volks- und Raiffeisenbanken. The aim is to align sales even more with the needs of customers.

Union Investment is a subsidiary of DZ Bank and is investing money in the new company itself. Bausparkasse Schwäbisch Hall and R+V Versicherung are also among the investors. More than half of the more than 700 Volks- und Raiffeisenbanken now want to use the services of the new company.

Some German financial institutions are already evaluating payment transaction data. In other industries, too, companies evaluate the individual preferences of their customers using the analysis of large amounts of data, known in technical jargon as “big data”. For example, people are filtered out of a customer base for specific advertising measures.

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Unlike its competitors, the cooperative financial group is looking for publicity with its “smart data project”. And she has to face public criticism: In September, Lower Saxony’s state data protection officer, Barbara Thiel, warned 90 cooperative banks against creating customer profiles for advertising purposes. The authority had previously checked a pilot bank that is testing so-called smart data processes.

Collection of some data criticized as unlawful

According to the authority, payment transaction data and data from external service providers on the living environment were used to calculate whether someone is interested in an installment loan. In your opinion, this data processing is illegal. It cannot be justified “neither by weighing the interests of the bank and the data subject nor by the consent forms used”.

>> Read also: These are the biggest data protection annoyances for companies

The Berlin counterpart shares the concerns. “We will examine this issue more closely as part of our responsibility for the Berlin-based credit institutions,” said the data protection officer when asked. The Federal Association of Volks- und Raiffeisenbanken (BVR) says it is “conducting a constructive dialogue” with the data protection supervisory authorities. “The talks are not yet complete.”

This is important for the company that has just been founded: “Only when this issue has been resolved can we tackle the full potential,” says Ulrich Coenen, co-CEO of Atruvia. “Technical progress enables better product adaptation to customer requirements. The extent to which previously accepted legal bases also need to be expanded is controversial,” says Coenen. The new company also uses some data modeling methods, which the cooperative financial group is discussing with the data protection officers.

“From our point of view, we can collect and evaluate the data if we explain to the customers what we collect the data for and what advantages we see for the customers. In our opinion, this corresponds to the General Data Protection Regulation (GDPR),” the Atruvia manager explains the position of the cooperative financial group.

The benefit for banks and customers is questionable

According to observers, the data protection assessments differ in some federal states. “There are still unanswered questions about which data the banks are allowed to use in exactly what form when profiling customers,” says Marc Buermeyer, partner at the consulting firm Zeb and an expert in customer orientation in private customer business. “Different state data protection officers judge certain questions differently.”

Commerzbank is one of the financial institutions that already analyze and process payment transaction data from customers. This only happens if customers have previously given their consent, the bank explains. As early as 2015, there was coordination with the responsible data protection authority in Hesse. Since the application of the GDPR in 2018, the bank has still not received any indications or complaints that speak against this procedure.

Deutsche Bank also states that it will comply with all data protection regulations when addressing customers individually on a case-by-case basis. In concrete terms, this means the corresponding customer consents, for example with a view to the evaluation of transaction data. According to the lobby association DSGV, the savings banks, market leaders in private customer business, also use customer data for sales purposes to which customers have consented. “A GDPR-compliant procedure was established early on within the Sparkassen-Finanzgruppe.”

The development towards more data evaluation by banks is still in its infancy, says Joachim-Paul Hasebrook, professor at the Steinbeis University in Berlin and head of research at the Zeb Business School. Success is also currently questionable: it is unclear to what extent the customer approach will actually be better through a broad data analysis than the classic offer by consultants, he says.

“In the case of new loan offers, for example the offer of debt restructuring, there are advantages for customers such as banks. But for a comprehensive comparison, there are still no corresponding results that could be compared.”

More: Small Raiffeisen bank attracts customers with above-average interest rates

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