“All changed, changed utterly”. Not my words, but those of W.B. Yeats in his poem Easter 1916. It might seem crass to use the words of a great poet to describe UK financial services – particularly given the heartrending change Yeats was describing – but it does feel as if we’re living through a time in which the way we use and interact with financial products is being transformed.
Unfortunately, when it comes to the banks themselves, it seems to be less a case of all change and more a case of “everything changes but you” – to quote Take That, a slightly less revered cultural reference point.
In so many sectors – music, books, communications, online retailing, to name but a few – two things have revolutionised the way we do business.
Firstly, technology and the web have enabled new levels of customisation and personal choice – almost anything can now be made exactly the way you want it, as long as you’ve got money to burn.
Secondly, a huge shift has reversed the power struggle between brands and their customers.
Big businesses used to be in control. They used to decide what we wore, listened to or read. They acted like filters, deciding which things warranted mass attention.
Now, customers are in control. Customers decide what they want and what they’re willing to pay for it – and if they don’t want to pay they’ll find ways of creating products themselves or sharing them with each other online.
If you like, consumers have stopped asking “can I ?” and replaced it with “why can’t I ?” and for the brands who continue to say, because it’s always been like this… well, their days are numbered.
If people want choice when it comes to music or information, if they want to design their own T-shirts or change the colour of their mobile phone why ever would they not want to customise financial products? Why would products that have such a radical impact on your quality of life possibly not be designed with the end user in mind?
Yet, that’s the model that prevails in financial services. Business finance has, for too long, been about “them” and “us” with one set of people dictating how money is used by the others.
Large corporations have set the agenda. It is their systems that have dictated what’s possible when it comes to product development and their risk systems that have decided who is a “safe bet”.
That agenda is changing.
It’s not about banks being evil. It’s about them being unable to lend. If you are asked to set more money aside as a buffer in case things go wrong, there will be less available to lend. The equation is simple.
What’s not quite so simple, is the solution.
Many seem to think that more competition is the answer. Competition that makes banks accountable and motivates them to become more responsive to customer demands.
But, so often, that “competition” simply replaces one institution with another. We don’t need that. That type of competition has led to banks launching hundreds of marginally different products for savings, mortgages or business loans in a bid to differentiate when little difference actually exists.
Instead of institutions, we need enablers. Enablers who can help people solve their real problems. Enablers who can connect people who can help each other and enablers who can remove barriers to customer choice.
Peer to business lending can do this. It’s about enabling straightforward transactions between people who want to make their money work harder (savers) and people who want a better way to borrow (borrowers).
Instead of hundreds of basically identical products, savers and borrowers will build their own products.
Customers will decide how much to lend/ borrow and over what timeframe. They’ll decide the best way to manage risk and they will be free to decide when to leave it all behind – without penalty.
There will be no “computers says no” rejections. Real people will support decision making.
And it will no longer be a zero sum game of who wins. These products are genuinely good for everyone.
They solve problems.