Published in November 2017 issue of Prospect Magazine
Prime minister Theresa May’s speech to the Conservative Party Conference in early October is likely to be remembered for other things – an unwelcome intruder, disappearing letters from the party slogan and a failing voice – but perhaps it should really be remembered for a surprisingly strong call to arms.
Announcing plans to impose a cap on energy firms’ standard variable tariff, she said: “The energy market punishes loyalty with higher prices and the most loyal customers are often those with lower incomes, the elderly, people with lower qualifications and people who rent their homes. Those who, for whatever reason, are unable to find the time to shop around.”
May was picking up on a more general pledge made earlier in the year – in the Conservative Party Manifesto – to protect what the party called “the vulnerable consumer”. And it was the vulnerable consumer that was the focus of a Prospect round-table discussion hosted in Manchester in partnership with Nationwide. Titled ‘Towards an Inclusive Economy: Delivering services for changing customer needs’, the discussion looked at how key actors – policy makers, regulators, technologists and industry – can create services that match the needs of all citizens.
Kicking off the discussion David Willetts, former cabinet minister and current chair of the Resolution Foundation observed: “Inclusiveness is a very fine objective but sometimes we find that standardization gets in the way of accepting the diversity of consumer needs and that in turn is a barrier to inclusiveness.”
By way of example, he suggested that the mechanics of lending can work against the interests of younger generations. The need to demonstrate stable employment and evidence of a permanent address can work against someone trying to get on to the housing ladder. “The regulations are perfectly designed for a world that doesn’t really exist for them,” Willetts said. “Creating a regime that is more tolerant of diversity and more tolerant of the way young people lead their lives would be a good path to follow.”
Robin Fieth, chief executive of the Building Societies Association, offered a perhaps rare example of where the regulator had been persuaded to adapt to changing needs – the willingness to embrace life-time interest only mortgages that offer security of tenure and lock in the valuation of the property. “We asked [the regulator] to think about this and they have,” Fieth said.
Willetts also suggested that technology can allow for more inclusive services. Driverless cars, for example, might provide mobility for the disabled, the frail and the young for whom the cost of car insurance premiums prove prohibitive.
On the other hand, technology can act as a barrier- not least for the 10 percent of the population digitally excluded. “I accept that,” said Willetts, “but I’m an optimist.”
Access to unprecedented volumes of data is another way technology might aid and improve service delivery. However, we must beware on relying on the efficacy of information in all cases, warns Ben Page, chief executive of Ipsos MORI. “We have more information available than ever yet people’s behaviour doesn’t change,” Page noted. The status quo bias was in evidence, for example, when the Thatcher government of the 1980s gave employees a choice on whether or not to have an occupational pension. “Twenty-five percent of people didn’t get around to getting one. So now we’re going to force you to have one.”
“Information doesn’t lead to a perfect market,” he said pointing to the paradox of choice – the more options a consumer faces the less inclined he or she is to make decision. “Benign despotism, maybe through clever tech, might be necessary.”
Jo Kenrick, chair of the Current Account Switching Service, agreed that greater choice can prove counterproductive. “The human brain is designed to avoid us having to take on lots of information and make lots of decision all the time,” Kenrick said. “It’s designed instead to provide habitual pathways so we can look at something and already know what the answer is.” That’s why successful consumer-facing companies have established brands that have become a shorthand for choice.
By contrast, Matthew Upton, head of policy for Citizens Advice, argued that some organisations know exactly what they are doing when they overwhelm customers with choice. “The whole energy industry is based on the absolute understanding that people don’t understand the choice they are making,” he said. “Complexity is a fantastic business model.”
Meanwhile, Richard Wainer, head of public affairs at EE, defended the choice mobile operators gave their customers. As people enter the final months of their contracts, Wainer said, “we call them and talk through their options … It’s that competition across the networks and operators that is driving quality improvement and driving down prices.”
Yet if choice can be overwhelming in some areas of the market, perhaps technology does provide answers by offering a means of aggregation. Stephen Jones, CEO of UK Finance, invoked the “concept of curation” where trusted editors identify services that best suit each individual consumer. Chris Bose, head of policy and public affairs at Nationwide said that the ability to analyse information and make recommendations based on the bespoke behaviour of every customer could be transformational. “The challenge,” he said, “is how do you get wide take up? How you go beyond the financially savvy?”
“The people that would benefit most from comparing products are often the hardest to reach. The model of the consumer that still permeates policy makers is still one of the consumer who is reasonably savvy, reasonably engaged,” Bose said.
For James Daley, managing director at Fairer Finance, there is a flaw in the aggregator model which is rooted in implementation – how do you know if the algorithm will work in your favour? “Sometime they’re brilliant and they are helping people discover better outcomes. Sometimes they are putting their own commercial interests ahead of those of the consumer.”
Technology has another potential role in creating a more inclusive economy growth – namely, by delivering value added services that build on an existing digital offer. Michael Gibbons, chairman of Elexon UK, offered a few practical examples. An app called Howz acts a virtual carer by spotting behavioural anomalies, a kettle unused or lights switched off, for example. Meanwhile, Smart Energy GB, the organization behind the smart meter roll out, is similarly experimenting with dementia detection techniques. “Once you’ve got smart technology in every home you have all sort of possibilities,” said Gibbons.
Ashwin Kumar, chief economist at the Joseph Roundtree Foundation, raised the role of credit scoring agencies as an area for concern. He suggested that there is a commercial incentive for these agencies to provide granular information about those with high credit scores but not to do the same for those who are seen as a credit risk. As a result, said Ashwin, people tend to get lumped into a “big bucket of bad”. This bucket will likely include someone whose credit score is poor because they once had a bad debt but have since been paying their social rent habitually for years. “Technology offers us huge opportunities but we haven’t really got to grips with this issue of transparency in a world where data allows much more price discrimination.”
Perhaps nothing beats the human touch. As noted by Holly Towell, senior public affairs officer at Macmillan Cancer Support: “Of the people born since 1970, one in two of us are going to get cancer in our lifetimes. Technology is amazing but we’re going to need amazing customer service to help people in those situations.”
An example came from Nationwide’s Debbie Ho, a former palliative and cancer care nurse. Ho is now a senior manager within the building society’s customer vulnerability and diversity unit. “We have created a dedicated service that is accessible in real time for people who live life with uncertainty,” Ho explained. “We shouldn’t underestimate the importance of human interaction and the difference it can make to the quality of peoples’ experience when life feels uncertain. For us [being able to offer] one named contact, one call away is incredibly important. We see the confidence and trust that generates.”
Companies, Jo Kenrick said, need to find a way to overcome the short term pressures put on chief executives to deliver immediate profit, a tendency exemplified by an obsession with quarterly financial reporting. Short-termism encourages companies to look at potential customer cohorts through a simple lens – which will deliver profit fastest. “So you end up with tranches of society excluded because they don’t look economically appealing enough.”
Kenrick characterised this practice as “herding”. Stephen Jones, however, suggested that many other organisations where more enlightened, pressing for non-financial metrics as a measure of long-term health and likely success. These metrics include customer satisfaction, culture and employee engagement. Rachel Maclean, the recently elected MP for Redditch and member of the Business, Energy and Industrial Strategy select committee agreed. Before entering Parliament, Maclean ran a small business in Birmingham. “We needed to attract good people,” she said. “That meant having good values and demonstrating that.”
“Technology presents a massive opportunity,” Maclean added. “It can improve people’s lives and it can address some of these vulnerability issues. But we’ve got a very long way to go and a big gap between what it can do on the ground for some of the people I see in my surgery.”
If this is a challenge for commercial organisations, it is also one for regulators – “It’s vital that we can work together,” insisted Indrani Gardner from the Payments Systems Regulator – and a challenge for government itself. “It’s right that government is putting pressure on business to look after the interests of the vulnerable consumer,” said Matt Hartley, head of public affairs at Money Advice Trust, “but industry should put that back on government and ask them how are they dealing with vulnerable consumers when it comes to public services. None of this happens in a vacuum.”
With the support of Nationwide, Prospect hosted a round-table discussion at the 2017 Conservative Party Conference on how improved access to services could help deliver inclusive growth.