- standardisation of services - not necessarily just one product (like 240 volts of electricity) but at least a way to be able to automatically compare products. The comparison websites are already moving the industry in this direction.
- low cost of service setup for the providers - I have no idea how much a credit check/score costs a lender, but if this cost is passed on to the customer as a fee, it becomes a form of tie-in.
- better data exchange facilities between customers and providers - if I can’t quickly, easily and automatically setup my direct debits with my current account provider, I am prevented from changing providers. Again, a tie-in, but this time imposed by the destination provider.
- and, most significantly, a significant provider in this marketplace to introduce financial services on this basis. Actually the real problem is that it needs more than one provider else there is no choice of provider.
I have a friend who works in the innovation team of one of the big banks. He recently asked an open question about the future of retail banking. I’ve had the questions running round my head for past few weeks and feel that I have some thoughts that are fermented enough to be aired. Aden, please forgive me if this stuff is just old hat to you - they are just random ramblings of an over active mind, not the result of any market research. My first thought about a concept of banking follwoing a utility model. At present we commit to provider for a financial product and service i.e. deposit account, personal loan, mortgage, home insurance. We commit to this provider based on explicit criteria (lowest interest rate, best cover) and value judgements (trusted brand, customer service). When we want to swicth between providers we have to go through a world of pain or pay exit fees. Now if we could give an online agent our criteria and allow it to move our deposits and loans between providers we would have a utility model for money. The problem is what needs to happen to enable this: