It is inevitable that the relationship between high street banking and data should break out into the political limelight. Banks, like so many other organisations, have become data storage and management businesses. And what data they hold: huge repositories of digital information about our spending habits, our salaries, debts and so on. If you want to know the unvarnished truth about someone, forget the polished images of their Instagram feed. The cold reality is in their bank account.
The final report of the Competition and Markets Authority’s retail banking market investigation concluded that there weren’t enough incentives for incumbents either to compete or to offer better services to customers. Giving easier access to people’s data would allow more entrants into the market, drive competition and help to broaden the range of services on offer. That not only leads to a greater range of more interesting products, but makes it more likely that people without a bank account might get one.
This makes the issue of who should have access to financial information extremely sensitive. New legislation, known as Open Banking, will allow third parties to come in and sieve your banking data. The argument is that it will allow consumers to switch bank accounts more easily. There is something in that. The high street is dominated by a small group of huge conglomerates and to have such an important market controlled by so few institutions is a sign something’s wrong.
There would be other consequences too, and this collection of pieces examines those possibilities. It would allow companies to get more involved in your financial life. An app, for example, might plug into your bank account and help you to manage your spending. It might also scan the web looking for a better deal on your overdraft, mortgage or whatever. It’s easy to imagine a whole load of new tools to help you get the best deals going.
Pursuing greater financial inclusion with no clearly-defined objective runs the risk of a descent into political vagary. Openness is no panacea either. The government will have to take extreme care to protect consumers, as a new wave of financial products and services become available—and that means more regulation.
But it will have to supervise the emergence of mass market financial technology without stifling its positive aspects—a tricky balancing act. The failure to regulate the conventional financial services sector back in the 2000s suggests that it will have its work cut out.
And yet cynicism can go too far. As this collection of pieces makes clear, the potential benefits on offer are enormous and have not gone unnoticed. Time to seize the moment.
Banking on Change is a publication which examines how we can develop a comprehensive policy approach towards financial inclusion. The report features contributions from the likes of John Glen MP, Peter Dowd MP, Anne Pieckielon, Chris Pond and Guy Opperman MP.
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