Fintech Insider Podcast by 11:FS
00:03:23 · Sarah Kocianski, Kate Moody
[00:03:23] S4: a singular category. Yeah. That doesn't sound like something a Fintech fairy godmother could fix. [00:03:30] S2: I don't know, I mean again, we've got our wishes to run through, But I do personally hold for certain flex product of a certain digital challenger bank responsible for enabling and perhaps even encouraging quite a lot of this shopping. Definitely I think Fintech overlaps with shopping for good and for bad purposes. [00:03:49] S4: Okay. I look forward to hearing more about that later on. Right. Let's see what we can wish for. Wish number one, Ross. What if banks were rewarded for helping customers build better financial futures? If I could grant that wish tomorrow, what would actually change?
00:04:06 · Ross Gallagher, Sarah Kocianski
[00:04:06] S5: It's such a good question. And look, know, I'm conscious that I'm starting us off with quite like a lofty position. You know, I think so much has changed over the last sort of decade, decade and a half of innovation and disruption in Fintech. Right? I wanna be clear, I'm not coming in and saying, oh, well, you know, how much has really changed? We've kinda got this nice new shiny front end and everything else is the same, right? I mean, that's not the case at all. I think things have improved materially for customers. You know, I think we've lowered barriers to entry. I think we've given customers much more effective, much more intuitive tools for managing their finances. I think culturally, pretty much across the board, I think we're all talking now about customers and customer outcomes rather than products. I think that's become quite pervasive. But I think where I'm sort of coming at this one from is I think in most cases, you know, the underlying business models have been much slower to evolve. Right? And I think in certain instances, those are quite inherently, I would say, misaligned with good customer outcomes. And I think that's the thinking. Can we be a little bit more ambitious? Can we challenge ourselves a little bit more to align what we're doing as an industry and industry players to aligning what we would consider good outcomes or good outcomes for customers. [00:05:27] S4: And what do you think is the biggest thing standing in the way of that at the moment?
00:05:30 · Ross Gallagher
[00:05:30] S5: Oh, it's such an interesting one because I think it kind of like comes from lots of different directions, right? So I think if you think about the incentives for a financial institution that come from customers, say building up and revolving expensive credit versus, you know, maybe building up savings parts and emergency funds and all of those sorts of things. You know, I think when you think about the zero risk approach that as an industry, I think we've taken to certain regulations. So for example, the advice guidance boundary, I think we've taken quite a zero risk approach to that. I think what it's meant is we're not then in a position to be to play a meaningful role in helping customers sort of build the futures that they want. You know, I think likewise when it comes to helping customers understand and how to engage with some more complex financial products, so investments, pensions, for example, again, I don't think we've been hands on enough in the role that those types of products can play in building better financial futures. Think really as an industry over a great many years, think we've quite lazily allowed investments, for example, to sort of build up this kind of negative perception or sort of brand. I think when it's come to things like pensions, I think we've we've kinda just operated on this, again, lazy assumption that, oh, well, customers just don't understand pensions. So what's the point? Right? But I think, again, you know, until we we need to take a much more hands on holistic view around how do we help customers get those outcomes that that they're looking for? How do we how how do we become a much more a much more hands on partner? How do we help them co create those outcomes? I think it's things like taking a much longer term view around customer value. I think it's things like pushing decisions around, you know, how we're engaging with those customers to teams that are much closer to the customer on a day to day basis. I think it's a lot of stuff that we're already doing. I mentioned that I think culturally we're much more we're sort of operating much more in that sphere already, but I suppose it's just pushing the envelope on our ambition and what we're really willing to do there.
00:07:49 · Sarah Kocianski, Kate Moody, Benjamin Ensor
[00:07:49] S4: I mean, Kate, Benjamin, if Ross got his wish, you know, if banks were better incentivized to help customers build stronger financial futures, what difference do think that would make to customers? [00:07:59] S2: I mean, I think hopefully the benefit for customers would be that, yeah, they would achieve better financial futures. Obviously, that actually looks like is going to be different for different people. Think, you know, we've done quite a lot of pieces of research work with different companies across financial services, we would look to precisely this problem, how can you actually map out what financial future somebody wants to move towards about it being just massively generic, you know, one size fits no one. So yeah, guess, I think the point Ross was making around the underlying business models is also really important, know, think actually really if we were able to restructure financial services in this way, probably what we would also see is yes, customers achieving better outcomes but probably also customers having to pay for financial services in a slightly more transparent way, know, I can't remember who to attribute it to, who probably but you know, that phrase, if you're not paying for the product, you are the product and I think that is maybe the shift that if you follow this wish all the way [00:08:51] S6: through,
00:08:51 · Benjamin Ensor, Kate Moody
[00:08:51] S6: through, [00:08:52] S2: you might need to shift across the industry as a whole that people have a better understanding of financial service providers are helping them to accomplish financial outcomes but to do that, you know, is a service that you as a customer need to pay for either directly or indirectly. So I think that would be a benefit as well but they'd probably also be, people probably also feel a difference in terms of financial service becoming less something that just exists in the background where you're being charged about even really realizing it, to something that you have to make conscious decisions about. What kind of help and support am I willing to pay for?
00:09:24 · Benjamin Ensor
[00:09:24] S6: I think there are plenty of companies and millions of individuals in the financial service industry who are trying to build better financial features for customers, but it's hard to do. The problem comes down sometimes to alignment. And there are products and sectors where it's much easier to get alignment between the customer and the firm and products and sectors where it's much harder. So a good example is investment funds, right? In theory, we invest in investment funds and the value of those goes up and we're paying a sort of fee based on the value of those investments, then in theory our interests are largely aligned with the provider of those funds. It doesn't always work, it broadly works. But then there are some other products perhaps like the one that Kate's husband enjoys where he's borrowing. Any kind of credit product sometimes there's an incentive for the firm to encourage customers to borrow maybe more than they need because the firm makes a profit. Or stockbroking is another classic example, stock trading where actually sometimes your best customers, the ones who trade most often, the best customers for the firm are the ones who are sort of doing the most harm for their financial future. So I think to crack this wish, you've got to, as Kate was saying, think about the incentives, think about the alignment, think about how the financial services industry is rewarded, have more transparency about some of the outcomes. We have this thing where people in many countries don't want to pay for financial advice because they think, Why should I pay for financial advice? Financial advice should be free. Maybe missing the fact that $100 spent when you're 20 or 30 might actually be worth many, many hundreds of times that later in your life because you took some better decisions when you were a bit younger. So think people would people notice because they would never have experienced another life. But I think there's a huge opportunity to give people better advice if we can just find good ways of aligning the interests of financial services firms with those of their customers, which mutually owned firms are generally a bit better at doing.