They’re all at it you know. Trying to get hold of your information. Where you shop. What products you prefer. How much you earn. How old you are.
No, this isn’t the introduction to some conspiracy theory – it’s a basic fact of modern life. From social networks to supermarket loyalty cards to consumer surveys, an immense amount of effort goes to finding out all about you. It's not because you're that interesting, to be honest, they just want to sell you stuff.
The irony is that the people that have the most access to your commercially-valuable information – i.e. your bank – make so little use of it.
Gillian Guy of Citizens Advice (the national body of the Citizens Advice Bureaux) thinks that this should change. She starts off by making clear just how little we currently mean to our banks:
- "At Citizens Advice, we are convinced that the banking industry is teetering on the edge of a brilliant idea; it just needs a good, firm shove.
- "With all eyes focused on banks’ risky investment arms, their retail responsibilities have been woefully neglected. British retail banking makes up just 21 per cent of Barclays’ profit. But providing bank accounts is an essential public service and a business model that desperately needs updating."
Indeed, the current model is broken:
- “For more than a decade, conventional wisdom has been that the only way to make money in retail banking is through interest on loans and debt, excessive overdraft charges, or up-selling additional products: mortgages, insurance, Payment Protection Insurance. This is a formula that is neither good for customers nor banks, which are footing a £14 billion bill for mis-sold PPI after a super-complaint made by Citizens Advice.”
Now that the game is up on PPI and the rest, there's talk of charging customers just for holding their accounts. But, says Gillian Guy, there's a much better way forward:
- “Your bank has access to an incredible amount of information about you… It knows who your energy supplier is and how much your last 15 bills were. And it knows comparable information about millions of other people too. So what does it do with this information? Almost nothing. It has been too scared to ask you for permission to use the data, even to help you.
- “But it is in the value of this information that modern banking’s breakthrough lies: offer customers accounts that do everything a utility switching site does – and more. Make money out of saving customers money.”
Privacy will be a huge concern. For this idea to get anywhere at all, it would have to proceed on a strict opt-in basis. Even then, what guarantees are there that the banks won't just hassle their customers with the banking equivalent of junk mail?
Gillian Guy's solution is consumer empowerment:
- "New regulations making it easier for customers to switch their bank come in later this year. People unhappy with the service they’ve received will now be able to leave in search of a better offer without fear of direct debits going astray or being stuck without easy access to their money."
In other words, a bank that gets it wrong, gets dumped – and all at the click of a mouse button.
If this idea works, then the potential is enormous. What we could see is a profound switch in our culture of personal finance – from one of careless consumption to one of computer-powered thrift:
- “…banks stop making money from encouraging customers to spend theirs on things they might not need, and start profiting from helping them to save money on the things they really do. It sounds obvious. It could be the future of banking. The race is on.”