Barclaycard Building Digital Bank
Earlier today, Tearsheet published an article about Barclaycard’s announcement that they will be building a retail digital bank in the U.S. in 2018.
The digital bank is quickly becoming a more prominent piece of the overall banking industry as more and more digital first banks arise and tier one banks counter with their own sub-branded versions. The other major industry trend is open banking, which is being mandated by PSD2 in the EU but being adopted elsewhere. Based on these two trends there are two key takeaways from Tearsheet’s article that I want to highlight both for the banking / payments industry as a whole but also for Barclaycard.
Data and Analytics
The movement of money is being commoditized. While opening up a digital bank provides lower operational costs than a branch based bank, data and data analytics are going to separate the winners and losers in the digital bank space which is why Barclaycard’s wealth of data and data analytics from being a card issuer is going to give it a great edge vs those that are starting from scratch with a born-digital bank.
“Being a card business and heavily involved in analytics, data and the power of payments is a good starting point for us to branch more deeply into consumer retail banking”
-Curt Hess, Chief Executive Officer, Barclaycard US
Barclaycard’s strong partnerships as white-label card issuer means that it has a ready market of companies who value the data and have permission to view and use the data. Figuring out a way to monetize data in way that doesn’t violate consumer data rights is a challenge for others but open banking is going to have an impact on customers giving greater permission to share data in order to receive greater value in return.
Ecosystem Adjacency / Interconnection
As Barclaycard looks to deploy infrastructure to support its new digital bank in the U.S. it would do well to consider the ability to co-locate where they can be adjacent to the sources and end-users of the data they sit on. While open banking is based upon using API’s to share data, there is a growing need for the industry to find meet-me locations where they can expose these API’s more securely and deliver data on low latency / low cost LAN connections. As Barclaycard plans to deploy a new digital bank in the U.S. the key markets to consider for its deployment are Ashburn, VA and Silicon Valley. These are markets where a growing number of banks, payment companies, and data aggregators are clustering to be adjacent to each other as well as cloud provider on-ramps.