The Future of Switching

How open finance will replace price comparison

The relationship between finance and technology is evolving fast. From mobile banking, through to payment platforms, fintech applications have become indispensable tools in the daily lives of billions of people. With some big players entering the market, such as Apple and Google Pay, it’s not yet clear who the winners will be. What is clear is that innovation in fintech is accelerating, raising the bar of what’s possible and the expectations of a new generation of consumers.

Automatic switching is one idea that’s quickly evolved into a game-changing proposition. With the ability to affect how consumers choose and purchase products and services, auto switching has the financial sector on alert. The true power of the technology lies in its potential to engage millions of sidelined consumers in markets they might otherwise have avoided.

In the last 12 months UK consumers forfeited £4bn in additional — and 100% avoidable — energy bill payments. That’s an average of £369.20 for each of the 11 million households currently on a lapsed energy contract.

When combining insurance costs with mobile and broadband penalties, charity Citizens Advice worked out that UK consumers who didn’t regularly seek better deals were £1000 worse off every year compared to those that did. This collective loss of billions of pounds to ‘loyalty penalties’ is not a new problem. But it is one that’s endured the e-commerce revolution of the preceding decades.

Price comparison websites have helped ‘unstick’ some customers from bad deals and encouraged competition on price. However, most consumers do not engage in the market enough to avoid being regularly shifted onto expensive, default contracts.

For all the fanfare and endless campaigning, PCWs have not ended the loyalty penalty, due to 3 key issues:

• The PCW customer journey is complex and time-consuming. Users are expected to have volumes of information to hand, and to interpret and input this information accurately across numerous touch points.
• PCWs require regular customer engagement. A typical consumer with a portfolio of fixed monthly bills needs to visit a PCW 5–6 times a year.
• PCWs leave many users with a feeling of uncertainty. PCW’s aggregate large amounts of information, but don’t help consumers evaluate and act on the information based on their own unique circumstances.

We need a different solution if we are going to end the loyalty penalty for good.

New digital services are emerging that give consumers the opportunity to be completely rational versions of themselves. By eliminating human problems like inertia, forgetfulness and choice overload from the equation, algorithms can now deliver unparalleled access to under served markets. This is achieved via a combination of intelligent monitoring and API integrations which can be used to deliver personalised quotes inside mobile applications.

Here are our top 3 developments that could hold the key to ending the loyalty penalty for good:

• Comparison & switch APIs can now be used to proactively locate and deliver quotes to consumers on sub-optimal plans inside third party apps. In effect this gives consumers instant access to switch markets, without having to visit a PCW or input additional data.
• Data-led personalisation of financial services means it’s now possible to identify and react to stress points in a user’s daily, weekly and monthly finances by creating services that sync with financial patterns. This means quotes, alerts and analysis can be delivered at exactly the right moment and with forensic level detail.
• Data enrichment enables a seamless and highly attuned customer journey and onboarding process. Location, property and credit data can be used to auto-fill applications, align preferences, predict future behaviour and tailor tariffs to include things like government subsidies and disability benefits.

Looking to the future, it’s clear the days of the ‘one size fits all’ approach are numbered. In its place we are seeing the beginnings of something more akin to a personal finance feed, wherein third parties deliver an array of tailored services through social-style interfaces. If you could be paying less your banking app will be able to show you a better deal and switch you in a couple of clicks. Filling out a form for every new utility bill will be a thing of the past. Consumers will be kept on the best deal automatically via a combination of open banking and auto switching technology, ultimately saving billions.

To find out more about The Future of Switching download our whitepaper.