UK Bank Charges Assessable For Fairness

Breaking news in the bank charges saga: the Court of Appeal ruled today that certain allegedly excessive current account charges can be assessed for fairness under the Unfair Terms in Consumer Contracts Regulations.

There'll be no further delay on that little issue, as the banks' request to drag it into the House of Lords was refused. [The House of Lords subsequently granted leave to the banks to appeal, due to be heard in June 2009]

So now, either (a) customers must endure another delay while the banks pompously trot out their evidence as to why the OFT was wrong to challenge their fees as unfair, or (b) the new significant shareholder in many of the banks can put an end to much of this nonsense by insisting they refund what was alleged to be excessive as a "fiscal stimulus".

Of course, a "fair" bank could always demonstrate real leadership on the issue, by simply issuing the refunds of its own volition. But it seems each bank believes that just wouldn't be fair on the others.

Oh, look, this post comes hard on the heels of the one where the European Commission says:

"in the banking sector switching is low and offers difficult to compare. The substantial variation in bank fees between Member States is not explained by differences in expenditure levels". In the first half of 2009, the EC will "assess the problems consumers face resulting from a lack of transparency in retail financial services."

Nasty!

EC's Consumer Markets Scoreboard

Meglena Kuneva, the EC's Commissioner for Consumer Affairs, appears to be trying hard to compile meaningful data on "how markets ultimately perform and deliver to citizens".

The Consumer Markets Scoreboard - only in its second edition - provides data on prices, complaints, degree of satisfaction, switching rates and safety. However, it finds that "more quality data are needed to develop a solid consumer evidence base... The current evidence... is still not enough to draw definite conclusions."

Nevertheless, the report makes a series of "observations", including:

• "consumers are less satisfied and experience more problems with services than with goods markets. The most problematic surveyed sectors are energy, transport (bus and rail) and banking services."
  
  
• "in the banking sector switching is low and offers difficult to compare. The substantial variation in bank fees between Member States is not explained by differences in expenditure levels". In the first half of 2009, the EC will "assess the problems consumers face resulting from a lack of transparency in retail financial services."
  
  
• higher switching rates (e.g. in the market for car insurance) means "consumers are less likely to report price increases". Though I'd observe that the number of TV ads for the plethora of price comparison web sites focused on car insurance suggests there is still plenty of fat in that market - 25% of consumers reportedly switch, but prices are reported as steady.
  
  
• "Cross-border retail trade is stalling. The proportion of consumers shopping cross-border has not increased since 2006, while the proportion of retailers selling across borders has declined. Nevertheless, while 25% of consumers have shopped cross-border in the last 12 months, 33% are considering doing so in the next year. If harmonised consumer regulations were put in place across the EU, 49% of retailers would be interested in selling cross-border. This would be a significant improvement compared with the 20% that currently sell cross-border. Online shopping is becoming more widespread but cross-border e-commerce is not developing as fast as domestic online shopping."
  
  
• "While complaints data are important to detect malfunctioning, the absence of complaints does not always mean that there are no problems... in some markets consumers have a low tendency to complain even though they experience problems, for example, in bus and rail and some food markets such as fruit and vegetables." Source: IPSOS consumer satisfaction surveys 2006 and 2008.
  

The report cites the following "Action points for 2009:

• A market study on the retail electricity market.

• A chapter on online geographical market segmentation in the retail market study which will analyse the problems consumers have when shopping online across borders.

• A communication on enforcement which will set out a global strategy to ensure the effective enforcement of the consumer acquis.

• Development of a regular collection of average prices of comparable consumer products and services by Eurostat and the national statistical offices.

• Development of a voluntary harmonised methodology to classify consumer complaints.

• Work to develop appropriate indicators to measure enforcement and empowerment with national stakeholders."

Brand As Facilitator, Not Institution

I was jamming with Mark Nepstad on Saturday about the role of brands and their agencies in social media - as you tend to do on Shiraz - when he showed me a publication containing this graphic, which came from David Armano's excellent "Logic and Emotion" blog.

What struck me about this graphic was not so much the ripple effect of conversations about a product, but how comparing the data from each social network would give a supplier an 'aerial' view of their consumers' community (specifically in case of Twitter, blogs and other "Level 2 Ripples"). With that data the supplier is better able to organise itself to help improve, or facilitate, its customers' experience.

The challenge, of course, is to resist the temptation to use the data to interfere and manipulate in a top-down, institutional manner, rather than facilitate consumers' bottom-up assertion of control.

The consequences of succumbing to this temptation can't be overstated. A supplier risks tapping the sense of frustration and disillusionment responsible for both the plunge in faith in society's institutions and participation in formal politics during the past 30 years, and the corresponding increase in our political awareness, informal political action and consumer activism, particularly over the past decade. Similarly, that sense of frustration and disillusionment marks the turning point between vicious and virtuous circles of consumer sentiment and related publicity. It was the difference between Barack Obama and that other guy (though interestingly the informal tactics of the new President actually drove a return to formal politics).

As I've suggested before, it is the "architecture of participation" created by various Web 2.0 facilitators that has been a very real catalyst in this rise in personal, informal, direct action. It has enabled millions of us to experience what it's like to personalise the one-size-fits-all consumer experiences offered by the likes of music labels, book publishers, retailers, package holiday operators, banks and political parties. So it can be said that the facilitators of this architecture are making the difference between us 'raging against the machine' in a lone, fragmented way and acting together as individuals in a concerted fashion. And it's a thrilling ride.

Used to this end, the data about a supplier's "Influence Ripples" amounts to yet another tool with which a brand, as facilitator, can strengthen the architecture of participation from which the data is drawn to help consumers personalise their experiences involving the brand's products - a 'virtuous circle'. Conversely, the very nature of the architecture in which the influence is rippling means that any supplier who is perceived to be using, or likely to use the data for Orwellian purposes - to manipulate or interfere for its own institutional ends, rather than its customers' interests - must find itself in a 'vicious circle' of adverse comment. There are several instances of this dynamic at work in the privacy sphere, around Phorm, the Data Retention Regulations and the recent ripples still emanating from Facebook's revision to its privacy and content ownership terms. [PS. And here's another, hot off the press on 25.02.09, as Ryanair trades blows with 'idiot blogger' and, oh look, it's getting worse on reports they're going to charge £1 for answering nature's call].

Reassuringly, I see that Mr Armano came to a similar conclusion in his own post, entitled (coincidentally, I swear) "Brand as Facilitator". With some more very nice graphics ;-)

Another Season In Aid of Prostate UK

Another season begins!

This will be my third competing in aid of Prostate UK in various rowathlons (row, bike, run - I hate swimming lengths!) and duathlons arranged by Will Whitmore at DB Max, and culminating in Marlow Rowing Club's Rower's Revenge in October.

The pressure's on, because this year I've followed Mark Allen's base training suggestion and spent much of the past 4 months training below my maximum aerobic heart rate to try to improve performance when the rowathlons start in May. The first 'warm-up' event is the DB Max Chilly Duathlon at Castle Combe Race Circuit next week, on 1 March - a cheeky 2 mile run, 10 mile cycle, 2 mile run that took me 59 mins and 47 secs last year. So whether the extra time and patience has been worthwhile is about to be sorely tested!

Will it all be for nought? Not if you donate a tenner each... ;-)

I'll post the stats on my Justgiving page, and share the highs and lows right here, as the season progresses. Last season's results were:

Trybike Mallory Park Rowing Tri - May 5th - 2.5k row, 20k bike, 5k run (time 1:19:13 - 21st overall). Dodgy transitions definitely cost me a place.

Castle Combe Rowing Triathlon - August 10th - 3k row, 20k bike, 3k run (time 1:11:51 - 27th overall and beating 2007 time of 1:13:29). It was all down to the run; more training time on the bike required.

Reading Rowing Triathlon - August 16th - 2.5k row, 7k bike, 2.8k run (time 36:22 - 19th overall). Went too quickly in the row, which killed the run, but it felt good and I couldn't resist ;-)

Marlow "Rowers Revenge" - October 5th - 4k row, 25k bike, 7.5k run - (time 1:42:50). Beat previous time (2005) by about 10 mins :-)

Hiding The Law Is No Defence

Bizarre, but true: the most frustrating thing about providing legal advice is actually finding the law. I'm not just talking about judgments, but also the statutes and regulations that burst out of Westminster like confetti at a wedding. It would be interesting to measure the cost of this inaccessibility, because it seems likely to be one of those nasty, unseen root causes of a lot of other problems, not the least of which could be higher legal bills, delay and the exorbitant cost of legal information services.

One impact was highlighted recently in a case in which HM Revenue & Customs inadvertently misled the Court of Criminal Appeal, no less, as to the relevant regulations in force until the "11th hour", when a Revenue lawyer spotted the problem while researching another case. Other cases may have been decided on the wrong regulations.

Given the law is ultimately there for our protection, it won't be much help if it's hidden.

The Free Legal Web initiative recommends 3 ways to improve the situation:

"Firstly, let’s improve access to existing legislation. This is the task OPSI have and it is one which FreeLegalWeb is addressing. But this is applying sticking plaster to the wounds.
So, let’s improve legislation via new legislation! The Leader of the House of Commons is on the case, describing the several ways in which the Government is simplifying and consolidating legislation. But that does not address the huge corpus of remaining existing fragmented legislation.
The third way we can improve access to legislation will be by far the most effective and it does not appear yet to have attracted any public discussion - and that is to improve the legislative drafting process. Legislation is drafted by the Office of Parliamentary Counsel and it is therefore to the OPC that we should look for the answer. To do their job in preparing amending legislation OPC need to work from a consolidated version of the current legislation. Why cannot that be made available to us?"

Indeed.

But I also think we could escalate the issue on the demand side of the equation. Representatives of consumers, SME's and large corporates alike should be demanding ready access to the statutes and regulations that govern our affairs. That should include not only the likes of the CBI and FSB, but also public sector representatives like BERR (doesn't "better regulation" include better access to it?). Even industry-specific bodies could get in on the act (excuse the pun) . The FLA would do well to insist that the Consumer Credit Act and regulations, fully annotated as endlessly amended, should be freely available online in all its ugly glory. And any self-respecting public information provider should be making the same demands - not only the likes of Which? but also DirectGov and Consumer Direct.

While it's perhaps not the sort of grandiose issue that The Great And The Good relish as a chance to strut their stuff on the dais at the Guildhall, it's actually the sort of "small" or "administrative" issue that needs their extra careful attention. As Ghost Dog famously recalled:

"Among the maxims on Lord Naoshige's wall, there was this one: "Matters of great concern should be treated lightly." Master Ittei commented, "Matters of small concern should be treated seriously."

Will The Semantic Web Kill Price Comparison Sites... Please?

Maybe I'm confused, but every time I see a TV ad for one of the multitude of financial services price comparison web sites, I wonder what proportion of the gross product price or insurance premium is commission to cover all those advertising costs.

Yet it's claimed that I'd pay the same price if I went directly to the product provider...

So then I wonder: if there has to be enough fat in the price to cover multiple distributors' TV ad campaigns, why don't product providers start semantic publishing? That way, a widget on my own computer could scan their datafeeds and identify the product that's right for me, based on my personal profile and other parameters I specify?

Surely this would bring down the cost of products and I would also see the whole market, not just those who are prepared to pay to be on the price comparison sites?

PFI Bailout: One Last Gulp Of The Kool Aid

To be fair, I did warn Ministers when Gordon drained the Cabinet tea urn and filled it with his own lethal Kool Aid cocktail. Don't drink it, I said. Do something useful. Take one of the nation's never-been-used military helicopters and fly out to meet the Taliban.

But oh, no. They just sipped away. Nonchalantly playing with the country's finances until, when they lifted the Union Jack piggy bank to their ears and shook it... nothing.

Well, hell. When you're mainlining on fearless ineptitude, that won't stop you. You just get taxpayers to stand in long lines outside banks with IV tubes running straight from their wallets into the vaults.

And as economy grinds into reverse, we have their last, best, brightest idea. The last big gulp from the Kool Aid: bridging loans for stalled PFI projects.

Boy, has that one knocked over the cappuccinos at the Taxpayer's Alliance!

Bridging loans? A bridge to where and when? "Until the economic climate changes, at which point the loans would be renegotiated." That's not a bridging loan. That's the financial equivalent of lighting an oil well and running away. How are we going to fund these things for an indeterminate period? How will they be repaid when the economic climate doesn't "change" in the way that is mysteriously expected?

Who knows? They certainly don't care. It's over for them.

The Leadership Crisis Is Ours To Resolve

Paul Moore's recent evidence to the Treasury Select Committee reveals the kind of top-down culture in the UK financial system that explains not only rampant over-expansion and the financial chicanery that went with it, but also arrogant, self-interested foot-dragging over such things as slow payments, mis-selling of PPI, acceptance of falsely self-declared income on mortgage applications and allegedly excessive bank charges. Intensive regulatory activity, checks and balances aimed at preserving the banks has not been enough to save them. For this, the very taxpayers who are poorly served as consumers must now pay.

After a string of CEO departures, the resignation of Sir James Crosby from his post as Deputy Chairman of the FSA, and with the "blame" now lying at the door of the man who was Chancellor through it all, there is no doubt we are in the midst of a leadership crisis.

But what lies in store for us once the "old guard" has gone? Who are the new leaders? Will their leadership improve?

Leadership is a rather nebulous concept. Over centuries, people have literally died trying to define it by reference to specific character traits, sundry personal qualities, types of behaviour, situational responses, functional responsibilities and so on. But regardless of whether or not leadership features all or some of these characteristics, it is ultimately a very complex, contextual, dynamic, inter-personal relationship between the purported leader and those he/she is trying to lead.

In other words, leadership is what the participants in the relationship make it, and we get the leaders we deserve.

But we know this, and we're acting on it. Our decline in faith in our institutions over the past 30 years, and the corresponding surge in political awareness, participation in informal politics, and personalisation of previously mass consumer experiences all reflect our growing individual pragmatism and our confidence in acting on it from the bottom-up. We have learned that great leadership is within our control because we are a fundamental part of that relationship. In essence, we are the leaders.

That is why, when Chris Skinner issued an apology to 98% of bankers for his rather apt criticism of banks, I suggested that in fact they should take his remarks personally. Because we know that as people they are not powerless. We know that great leadership will emerge when the 98% respond to the criticism, bottom-up, by forging a decent relationship with their customers, putting those customers first, ahead of their managers, executives, board directors or shareholders. Only then will we see decent, sustainable profits from the finance services industry.

BarCampBank Valentine's Day

Forsake your loved ones! Your country needs you at BarCampBank in London on Valentine's Day.

Given that a BarCamp is about as grass-roots as you can get without actually going out into your snow-filled garden and digging, it's a great opportunity to question everything from the bottom up - to really turn the world on its head.

While, unfortunately, I have other commitments on Valentine's Day, I'm fascinated by what the attendees will come up with in terms of "new business models in the world of banking and finance", and possibly democratising the financial markets.

In an attempt to help, I plan to jot down on this post various issues and observations that occur to me this week.

Closest to my Zopa heart are person-to-person mortgages and person-to-person invoice discounting for SME's. But I'm aware that those two suggestions assume an awful lot. The real starting point should be what financial problems do people face today, how big are those problems and what array of solutions might solve them? Ideally, this inquiry should not be driven by, or viewed through the lenses of products in the market today. But it would also be interesting to question today's retail products. Do we need credit cards, for example? If so, why? And why/for whom do the financial markets exist. And so on.

Indeed, what would happen if I went AWOL for about 10 hours on Saturday ;-)

Here are my builds:

1. I reckon there are 8 characteristics that any new retail financial service will need to acquire critical mass.

2. Banks can be the back-office of financial services 2.0 - after all, the money that's not currently lent out at Zopa sits in a segregated account at RBS.

3. See Dave Birch's post on payments without banks. My 10 cents worth on alternative currencies:

• A facilitator would need to gather enough reasonably reliable data on each "currency" for users (or the facilitator itself) to estimate the exchange value.
• People could list "currencies" they have a surplus/deficit of and the facilitator could show matches, with or without estimates of exchange value.

What functions currently reserved for "authorised" financial institutions could be opened up for more lightly regulated players (following the trend set by e-money and now payment services for example).

4. Chris Skinner has listed various "next generation" financial services firms due to present at Finovate in April.

5. Note that "payment service providers" will be able to passport their services throughout the EU from 1 November 2009 - the UK regs went before Parliament yesterday. Similarly, the E-money Directive is also to be overhauled, largely to reduce the capital burden on e-money businesses, and to ease the restriction on conducting other business.

6. Here's an interesting piece of context. In December 2007, Royal Bank of Scotland paid $100bn for ABN Amro. A year later, the same money would have bought:

• Citibank $22.5bn
• Morgan Stanley $10.5bn
• Goldman Sachs $21bn
• Merrill Lynch $12.3bn
• Deutsche Bank $13bn
• Barclays $12.7bn
• And with the change $8bn .....they would be able to pick up GM, Ford, Chrysler and the Honda F1 Team.

Back to Basics - Financial Capability Starts Here

While I have a basic competence in Mathematics, passed statistics and even got my Six Sigma 'greenbelt', I've never quite had a 'feel' for it, like some people I know.

In fact, Maths was the one subject at school that annoyed and disappointed me in equal measure (sorry, double that for Physics), as did most of the people who purported to teach it to me. They did little but drone on about their subject, instead of... well, I just never knew how they could've made it interesting. And, like most lawyers I know, I've often flippantly boasted of having 'no head for figures at all' - probably because it sets us apart from accountants... ;-)

However, increasingly aware that this 'phobia' is rather silly, I recently Googled something like "explain mathematics to me now!" and ended up buying a copy of Mathematics Explained for Primary Teachers by Derek Haylock.

Fantastic!

Derek patiently explains Maths from the beginning - in words - missing no step in the logic. So one is never left with that "Huh? You lost me" plunge into the chasm of uncertainty so common in Maths classes. While he's very clear on the formal steps required to solve each mathematical riddle, critically for the under-confident, Derek also carefully explains - and firmly validates - all the informal routines that one might go through in an attempt to grapple with a problem. There may be one right answer, but I was stunned to learn there's no "right approach". And what seems an "easy" way for one person is quite likely to look a bit screwy or "wrong" to another who's never had things properly explained. The point is neither deserves a clip over the ear and five minutes facing into a corner of the classroom.

As someone who has taken many apparent slices into the rough before joining the rest of the class on the mathematical green, this was a joy to discover. A great fog of cringing uncertainty is lifting. In fact, reading this book for the first hour did more for me than the 3 hours a week I spent observing dull, well-intentioned people scratching around on blackboards for 12 years.

Of course, the Derek wrote the book because many teachers and potential teachers of Maths suffered the same experience in their Maths classes at school. As a result they won't teach it, or won't teach it very well for lack of confidence in how to explain it to kids who demand greater understanding of the subject. So, increasing their confidence is key to persuading them to educate our kids in a far more effective way. Derek deserves a medal.

While finance is but one application for Maths, one can't help thinking that we would all be much more financially capable if more teachers - and perhaps parents - read Mathematics Explained for Primary Teachers. Did you know, for example, that subtraction is now taught differently, and that parents and grandparents are often, tragically, an unwitting source of confusion as a result?

This is the role of the Personal Finance Education Group, which has been doing great work in this area - arming teachers with the self-confidence to teach Maths in a financial context. Let's hope this also has a broader impact.