Amidst all the headlines about nudging people to shop around for better deals, few have focused on issues around the flexible transfer of personal data when they do
Plans to improve competition between high street banks by the Competition and Markets Authority (CMA) raise as many regulatory hurdles as they do hopes.
At the heart of the obstacles, as perceived by the CMA, lies one big question: “Whose information is it anyway?". Amidst all the headlines about nudging people to shop around for better deals, few have focused on issues around the flexible transfer of personal data when they do.
For example, it's unclear how the Financial Conduct Authority will view the sharing of individual spending information in light of the new General Data Protection Regulation (GDPR). This already establishes a right to ‘data portability’ under which customers will have the right to request that data they have provided to one institution is transferred electronically to another.
What remains uncertain is whether the data portability requirement under GDPR applies to data gathered during a transaction, something banks may wish to claim as their own. Data is after all now an asset class; the new oil, as some commentators have suggested.
There are also awkward issues for customers, such as realising that what may be acceptable spending habits to one bank may seem reckless to another. How will people know before making the decision to move?
If banks avoid this dilemma altogether by just not sharing spending history, how is the new bank supposed to offer added value services of the sort the competition watchdog wants to encourage? Above all, the ambition to encourage mobility relies heavily on new technology easing the path to shopping around, which is by no means a given, even if it is clearly an aim.
But to some extent banks have to remove barriers anyway. For example, the EU Payments Services Directive (PSD2) requires them to give authorised third parties access to customer accounts in order to support new payment service providers.But it's one thing to let third party payment systems access an account for transactional purposes, quite another to offer up a full history of an individual’s buying habits.
There may be a bigger question at the heart of the effort to make banking seem as straightforward as supermarket shopping: Just how motivated will anyone be to compare products, let alone use an app to do it? Despite the 7 Day Account Switch Service being introduced nearly three years ago, the predicted stampede and mêlée of customers migrating their entire banking affairs between banks has simply not materialised. All this suggests customers are simply not as motivated to shop around and switch between banks as expected.
For many people their choice of bank is often based on geography or family history, not rational economic reason; and the relationship is complicated. It often has little to do with cost or ethos, which might be said to underscore marketing in the retail sector, but on an assumption that loyalty is rewarded and regarded by lending institutions. Unlike choosing one supermarket pasta over another this relationship can actually have a major influence over important life choices and opportunities. Many will ask whether it is worth rocking that particular boat. There is also inertia to contend with, as efforts to get people to switch between utility providers has shown.
Even if we believe people are motivated to move with help, how often will they do so to make the idea work rather than grind to a halt? It is hard yet to see from the available technology a seamless, frictionless transfer process that might answer that particular, rather fundamental, question.
One area of development that may hold the answer is the concept of a personal data store. This is where individuals store all of their own data; for example, identification documents, insurance documentation, transaction histories, medical information, and can enable access to that data to different providers for different purposes. If individuals can collate and use their own data with speed and ease, this will facilitate all sorts of new activities, including switching banks and other service providers.
To date none of the personal data stores that have been launched has really taken off, due to concerns around data security and lack of a common standard hampering take-up. But assuming these obstacles are overcome in due course, the personal data store may well facilitate comparisons and switching to a degree that was previously unthinkable.
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On 12 October 2018, the FCA published a Guidance Consultation (GC 18/4) on the Senior Managers and Certification Regime on statements of responsibilities (SoRs) and responsibilities maps (which apply to enhanced firms).