From 13th January 2018 the government will be making an important change to banking that I would urge everyone to take advantage of it if they can.
For over a year the government has been working on a step-change banking reform to aide consumers in switching banks.
Have you changed your gas or electricity provider? Or maybe your motor insurance? Millions of Brits do so every year by taking advantage of a competitive network of providers and price comparison websites to avoid price increases and save money.
In 2013 the government launched the Current Account Switch Service to encourage bank account holders to look into switching. At the time of its launch just 2% of people had switched their current account in the past year. This compared to 33% who had switched car insurance and 12% who had switched gas and electricity providers.
However, despite some success, only 1million Brits switched their current account in 2016. By comparison, nearly 5m switched energy provider.
The surveys are pretty damning, but they are also illuminating. A YouGov poll found whilst over three quarters of banking customers would consider switching, 30% said that all banks offer the same service and 43% said that a lack of clarity makes it difficult to make an informed choice. Unlike switching a gas or electricity provider, where the cost to you is very clear and transparent, most banking customers are unaware of how one bank’s service might differ from another.
Clearly there is a thirst from consumers to make banks compete for them, rather than the other way round, but a lack of information about the potential costs and benefits of a bank account means that relatively few customers can see the benefits.
So why doesn’t a price comparison website exist to compare different bank accounts? After all, 3.5m Brits switched used one in the last year. The trouble is that banking is a far more complex and data-driven industry than utilities.
That is why the government has been working on a reform that goes much further: Open Banking.
Open Banking will open use of data to 3rd party providers in order to create open APIs (such as smartphone apps) through which users will be able to compare the relative advantages of different banks. Data has overtaken oil as the most important resource in the world, and this reform will tap the potential of enormous amounts of data currently lying dormant and harness it for the benefit of consumers.
This is the Conservative view of free markets in action: utilising competition not only to promote innovation and lowers costs, but also to empower consumers.
This is arguably one of the most revolutionary projects in fintech and it is happening right on our doorstep. It is also one of the many policies that gives me confidence that Brexit will create opportunities, not signal Britain turning inwards.
Open banking perfectly encapsulates what fintech is about: a revolutionary innovation that not only saves Pounds and pence in efficiency, but which empowers consumers and places Britain on the cutting edge. I hope that you will all keep an eye out for Open Banking in the New Year.