Fairer financial products for everyone
In the third part of this series I will expand on personal data empowerment and how Jigsaw’s marketplace technology, built around consented personal data access, will connect individuals to the most appropriate products based on their needs. I will do this by explaining how we are applying our technology to the financial services industry.
We focused on financial services due to the unnecessary complexity and inequality often seen in financial products available to us, our friends and families. In addition, everyone needs money, whether it be to buy things or to save for the future.
Keep it simple, stupid
We started small with a very simple proposition built on the back of the Open Banking principles. Our first aim was to understand the need of the individual or Small to Medium Enterprise (SME). Open Banking, with the appropriate permissions, allowed us to access an individual’s financial accounts, through APIs (Application Programming Interfaces), and then build a financial profile for any consenting individual. Once we had built a financial profile, using historical transaction data, we were able to augment this using other external data sources, for example using Xero, for SME invoices. Using this information and some statistical models we were able to model future cash flow impacts for the individual. Will they run out of money, or are they sitting on surplus funds which could be realising greater returns?
Once we had built confidence in our financial modelling of the individual, we designed and built what we considered to be a fair Independent Financial Advisor (IFA) for the everyday individual and not the wealthy customer who can afford an IFA, as is the case currently. In order to do this we needed to scan the market and bring back all of the financial products available to a specific individual in real time. This was easy for some of the more mainstream financial products and was harder for the more complex financial products. We chose to focus on a savings marketplace and a lending marketplace so we can provide products to individuals with either too much or too little cash.
We have created a simple product that can create a financial profile for an individual, predict their future cash flow and then offer them access to either a marketplace of lending or savings products dependent on their current situation.
This demonstrated two of our core marketplace technologies, understand an individual’s need and publish a request-for-quote (RFQ) into a defined marketplace, explained previously.
Moving from crawling to walking
Following our initial development we took our fundamental idea, of giving the individual access to the most appropriate products, to the next level and focused on a new theme, which we coined ‘kill current accounts’.
We realised that the most inefficient financial product and most broadly used, was the basic current account, whether it be a personal current account (PCAs) or a business current account (BCAs). Approximately £1 trillion of spare cash sits in UK current accounts. That is £1 trillion of funding that could be earning interest elsewhere, in more competitive financial products. This is where we started to ask the question ‘why do we still need current accounts?’.
In a new world of open banking, new payment networks, and instant money movement the answer is, as a customer, we don’t. Since the early 1970s the big retail banks have used the funds in current accounts to support their balance sheets, offering customers very low, or even 0% on current accounts. However, times have changed and the individual deserves a smart account which manages their funds systematically, moving them from uncompetitive financial products, to the best products available on the market, daily.
So we are building the technology to deliver this.
Collaboration not competition
Our next consideration was, how do we launch this first iteration? After a lot of debate, we decided, rather than competing with the banks and launching our own product, we would help banks across the world to reinvent themselves. Why? Because we believe if we can help the incumbents improve their products and how they operate, we will make the biggest impact for our friends and family. Most start-up challenger banks have grown organically over their first few years and a million customers is considered great progress. However, the ten largest banks in the UK have over 130 million customers between them. Therefore, to make the most impact, it was simple, we would try to extend the services we had built to a traditional bank.
In order for this to be a success it is vital that incumbent banks can understand an individual’s need, their digital voice. So, first we had to build the banks their digital ears, which allow them to ‘listen’ to the need of the individual.
Finally, we decided to take this one step further and help the banks to build personalised financial products that match an individual’s specific needs. We believe personalisation of financial products is key to the future success of the incumbents. This is no small ask as the bank must combine and balance external market data with individual customer data and then consider the banks position on that specific day, in order to manufacture a truly personalised financial product.
All of this is being built using our marketplace infrastructure, called Spoke, our customer focused exchange traded technology.
The hare or the tortoise
This will take time. It is about small steps, learning along the way. We are helping the banks understand that it is not only a technology challenge, it requires process change, culture change and it needs people who understand what we are trying to do but more importantly WHY.
Our aim is to help the individual move money from uncompetitive financial products, to the best products on the market, based on their individual needs, every single day. This gives our banking partners the opportunity to personalise their offerings, ensuring that they are not only the best price, but also the right product for the individual, based on the holistic needs of that customer and right for the needs of the bank. This is about aligning interests.
Most importantly, we are helping our partners become data led organisations, using the data from the requests and responses to drive their future product offering and product pricing strategy.
Being purpose driven
Going back to the beginning of this series, in order to make all of this work we need to ensure we empower the individual to own their data. We must keep our technology simple and easy to execute. We are going back to a traditional world of finance built around TRUST, the more an individual trusts us, the more they will share and the more we can help. We are just using a bit of silicon, 0’s and 1’s.
In conclusion, and whilst I cannot predict the future, I believe by building a technology platform that represents the need of the individual, using a consent driven model, we can connect to a marketplace of suppliers who can personalise the financial products the individual needs. This has to also be based on the interests of the bank, and what they need to ‘supply’ to allow the banks to run a profitable business.
We are in the midst of a data revolution, albeit early in the revolution. Lots will change, new entrants will appear, operating and business models will shift.
Rather than just accepting the ‘easy life’ in exchange for an asset with great value, our data, maybe together we can build an alternative model, one which represents us and our community and allows the supply to define the demand for the products and services individual’s are provided.
There’s more to life than money
Our marketplace technology is not solely focused only on the finance industry, but instead it is a technology solution focused on the individual, empowering them and supporting them across all aspects of their life. We chose to start with finance because money makes the world go round…but there is more to life than money :)
We are using this same technology across a variety of other industries to empower individuals. To continue this discussion and find out more, get in touch with us at hello@jigsaw.xyz
