Dr Louise Beaumont is not mincing her words: for too long the financial services world has been a “fat complacent oligopoly with zero innovation” she says, with single-mindedly defensive approach to data: “If you play the word association game where I shout ‘fish’ and you shout ‘chips’ — if shout ‘data’ in a bank someone will shout ‘breach’. These haven’t been conversations around ‘I wonder what this data can tell us about people and their needs?'”
Beaumont — an expert in innovations in Open Banking, Open Finance and payments, who “works with legislators and regulators to create disruption, with corporates to cope with disruption, and with start-ups to exploit disruption, with open and accessible data as the guiding principle” — chairs the Open Finance & Payments Working Group at techUK.
Joining The Stack to talk financial services innovation, she notes caustically that “financial services is a great name for a sector, right? It sounds lovely. But these were, historically, big dumb products; created in a factory and mass marketed without consideration for the end customer. There was never really any service.”
The idea in its most rudimentary form was given momentum in the UK by the Competition and Markets Authority (CMA) back in 2016, when the regulator’s investigation into the retail banking market concluded that “older and larger banks do not compete hard enough for customers’ business and that Open Banking should deliver a new, secure option for customers to be able to compare the deal they are getting from their bank.”
Banks were subsequently compelled, where customers permitted, to share customer data and five years later, there has been grudging movement towards this vision of a more heterogeneous environment.
(Open Banking — an organisation set up by the CMA in 2016 — cites an ecosystem of more than 200 third parties “delivering tangible products and services powered by Open Banking to more than one million users” in the CMAs 2020 “Final Approved Roadmap for Open Banking“).
Dr Louise Beaumont: “There’s a chronic imagination gap”
But the radical possibilities afforded by more open data are still a glimmer on the horizon and Beaumont thinks as much as risk-averse banks, an “imagination gap” is to blame. She tells The Stack: “For a long time, I’d leave work late on a Thursday night, and I would stand outside in the cold and the dark surrounded by drunks, put my hand up in the air and I’d wait for a certain type of car with its light on to happen to drive past me.
“I would accept that they would only ever accept cash… and I’d give them a large tip because I was just grateful I had black cabs and black cabs were the best cab in the world. And I would pay a premium for that.
“Now you’ve got the Uber experience. Why? Because they asked for your location data: something a cab never asked for. Black cabs would even see it as a sign of weakness to use SatNav, even though it would show you where a road was unexpectedly closed. Those are simplistic examples of where you didn’t used to share any data with these people because they had a big dumb standardised product. But to get hyper personalised, predictive, and pre-emptive products, you need to be pulling lots of data from lots of different sources.
“Open banking is one data source. There are many…”
Why aren’t more diverse and personalised financial products hitting the market?
“The real issue that banks have a chronic imagination gap: they just can’t think beyond their snug sub-segment. They need to be thinking about the thousands of data sources that they could use to power interesting services that we didn’t know about, didn’t ask about, or didn’t know we needed but soon won’t be able to live without.”
This innovation rebarbative means that “if you’re a Fintech selling yourself to a bank, you’re probably stuffed, because the bank will ultimately close you down” she warns: “We’ve seen that several times recently; for example with BBVA in America shutting down Simple Bank. They’re buying to either take you out of the market, or to inveigle the little bit of innovation that you’ve been able to create into their product.”
Thus far, the R&D money, the curiosity, the ability to imagine new data-driven services is still more likely to come from Big Tech, she suggests. But why? “The short, one minute answer, is that banks hire people who work in banks. If you look at any banking CV, typically, they will have worked for nine other banks. I don’t think any hiring manager in any bank ever has ever said: “Right! I need somebody who’s got a powerful imagination. Smart tech does.”
Agree? Disagree? Have some compelling examples of powerful imagination at work in financial services? Get in touch.